Hundreds of Kenya Airways (KQ) employees are expected to lose their jobs as the firm commences a right sizing exercise as the company deals with the fallout from the COVID-19 pandemic.
In a memo to staff seen by Citizen Digital, the carrier says the staff rationalization has been forced upon by the firm’s dwindling revenues which have supressed the carrier’s operations over the last three months owing largely to the grounding of passenger flights.
“A decision has been reached to carry out an organisation-wide rightsizing exercise which will result in a reduction of our network, our assets, and our staff. Effectively, we have commenced a phased staff rationalisation process, which we expect to conclude by September 30 2020,” noted KQ CEO Allan Kilavuka.
“With the suppressed demand for air transport, a large part of our fleet will remain grounded. We will also operate a reduced network when we resume our services as we anticipate that it will take some time before the industry starts to rebound.”
Kenya Airways lifeline under the current turmoil has been in cargo lifting with the company previously warning it would lose up to Ksh.50 billion by the close of the year to nearly half the record Ksh.128.3 billion revenue written in 2019.
KQ has previously hinted at a reduction to its resource base as the company adopt to the new-normal including staff and network.
The company can however look forward to a potential resumption of domestic flights in the near term with President Uhuru Kenyatta recently hinting at the planned resumption of internal aviation.
Both transport Cabinet Secretary James Macharia and his tourism counterpart Najib Balala have carried out inspections to the Jomo Kenyatta International Airport (JKIA) and Mombasa’s Moi International Airport (MIA) ahead of a potential announcement on local aviation next week.
Kenya Airways is not the first carrier to downsize staff with gulf carriers including Qatar Airways and Fly Emirates having trimmed their employee base in recent months.
In Latin America, the aviation sector faces a more fragile situation with leading carriers including Avianca and LATAM Airlines (LTM) having declared bankruptcy in May.
By reducing on its staff and network, Kenya Airways will be seeking to trim its overhead costs amidst dwindling revenues.
Prior to the pandemic, KQ had a staff base estimated at 4000 and operated a fleet of 36 to 54 global destinations.
Recent trends have however indicated a reduction in capacity with all indicators pointing to a late resumption of international flights leaving the carrier with the domestic scene as the life-line in the near term.
Staff costs in 2019 rose by Ksh.986 million to Ksh.17.05 billion as the carriers total operating costs surged to Ksh.141.3 billion on the back of increased operations and changes in accounting estimates.
The drove KQ to an expanded loss of Ksh.13 billion for the year in spite of a steady rise in earned revenues.
According to a source who spoke in confidentiality to Citizen Digital, KQ’s staff rationalization exercise will set its aims first on soft targets including sub-contracted staff, trainees and staff on probation in its attempt to save on costs emerging from termination benefits.
KQ has recent months waiting upon government to inject an estimated Ksh.4 billion in a new loan arrangement to ignite its bounce back having first received Ksh.5 billion in a first-tranche credit line in February to run routine maintenance on its fleet.
The airline is currently nearing a re-nationalization plan that will see it return under the wings of government through a soon to be established Kenya Aviation Corporation.
On Friday, the Nairobi Securities Exchange (NSE) suspending the trading of the companies shares ahead of the plan and following the submission of the National Aviation Management Bill to Parliament last week.
The bill which is presently under consideration by MPs is expected to stamp KQ’s renationalization having been privatized in 1996.
The National Treasury which holds a majority 48.9 percent stake in the airline is expected to buy out minority shareholders before re-capitalizing the carrier under State management.