Intrigues behind bid to nationalise KQ and push pilots out of cockpit

Do not repeat the tactics which have gained you one victory, but let your methods be regulated by the infinite variety of circumstances, so states The Art of War by Sun Tzu.

Kenya Airways #ticker:KQ pilots needed this lesson from the ancient Chinese, because they have fallen to the danger the philosopher had foreseen; the possibility of being outmanoeuvred.

Over the past 10 years the national carrier’s pilots have gone on strike several times, more so in the recent past, and they have won some concessions.

It is the business of unions to use strikes, and while the Kenya Airline Pilots Association (Kalpa) has issued many strike notices over the years, their effectiveness reached their peak in April 2016, when they managed to force out Alban Mwendar, the airline’s group human resource director since August 2011.

They had drawn blood and issued notices to down their tools in October 2016, forcing out Dennis Awori as chairman and setting in motion the exit of the airline’s chief executive Mbuvi Ngunze, who was to leave by the end of March the following year.

The union had won a powerful victory, directly influencing the management of their airline, but the victory came with a cost. The loss-making airline had found its underbelly, which was moving the public against it.

“The attempt to paint Kenya Airways pilots in a negative light by stating that the airline lost Sh200 million as a result of the April industrial action is indeed a diversionary tactic.

“It must be highlighted that Kenya Airways has lost Sh52 billion in the last two years mainly through bad decision-making and corruption,” said Kalpa’s Paul Gichinga in October 2016.

Unlike doctors or teachers, who directly influence the everyday lives of Kenyans, pilots are considered elite, unrelatable to Wanjiku, and their strikes derive support on moral grounds, such as helping revive a poorly managed airline.

The strike had also won KQ pilots a lucrative deal under a collective bargaining agreement (CBA).

In July the aviators withdrew the goodwill of the deal, leading to flight cancellation and shortly after managed to sign the deal in August 2017.

In November that year engineers had learnt from their flying colleagues and went on a go-slow demanding “international scale salaries”.

They were no longer saviours of the airline but were now cast as self-interested rich children.

Then a development in March 2019 changed how strikes were handled.
Initially, KQ would move to court and obtain largely ignored orders and later be forced to the table when losses over flight cancellations piled up.

But in March, when the Kenya Aviation Workers Union (KAWU) tried to go on strike, the government sent in police to break the industrial action with batons and teargas, a clear sign they were no longer willing to negotiate.

In 2018 pilots had successfully resisted the hiring of contract aviators for cargo aircraft.

“Last year Kalpa went on a go-slow and rejected and restricted the recruitment of contract pilots to the Embraer 190 aircraft of which these pilots are difficult to recruit, yet to date the cargo business continues to suffer cancellation due to crew shortages,” KQ management said in a report to Parliament.

But now with Chief Executive Officer Sebastian Mikosz’s surprise decision to exit, he has been handed leverage, because pilots cannot threaten to oust him.

The rough treatment given to KAWU has also demonstrated the thinking in government, which will soon be the employer that does not want to inherit a powerful lobby.

KQ has brought back the issue of contract pilots as a sort of provocation for Kalpa, which now seems to have been boxed into a corner as the struggling airline targets trimming operational costs and cutting pilot salaries, which it says eat up 40 percent of the payroll yet they are just 13 percent of the workforce.

As expected, the recruitment of 20 contract pilots for its Boeing 737 fleet is setting the airline on a collision course with the pilots’ association, which the airline says has been standing in the way of this overdue enlistment.

Just before the chess move, KQ management went on the offensive, claiming the airline lost Sh5 billion in about 12 months through flight cancellations and delays amid plans by the national carrier to cut down routes in a race to improve efficiency.

Mikosz said the CBA allowed pilots to be absent for 48 hours without giving an explanation.

“I don’t know any group in Kenya where you can call in sick and not bring any certificate and not just come to work,” he said.

And here came a rejoinder from the pilots: “KQ should stop looking for scapegoats in pilots. Should pilots offer services for free, KQ would still declare losses,” Kalpa General-Secretary Nyagah Murithi said recently.

The association also blamed KQ managers for increasing flight frequencies without having the right crew size.

In the past few weeks, 4,234 passengers have had their flights disrupted, up from a previous average of 905 passengers.

The management said that in the first two weeks of August 2019, KQ cancelled 91 flights, of which 68 were due to crew constraints.

Pilots did not know how to react at first, seeming to be resigned to the fate of the failing airline and trying to fight off carrying the blame for its failures.

Kalpa said the airline has a biting pilot shortage, with 414 aviators having to operate a schedule that requires approximately 600 pilots.

“The shortage is due to a low rate of recruitment and pilot attrition. It is no secret that Kenya Airways has one of the lowest rates of pilot recruitment in the world,” Muriithi said.

For its part, KQ says it has hired 30 pilots this year, against a target of 48 by the end of the year. The airline says it has a shortage of only 106 flyers.

The decision to cut routes barely two months after it launched flights to Rome, Italy, and Geneva, Switzerland, shows lack of strategy at the highest office, with Kalpa saying it demonstrated management problems.

After realising they would be bulldozed when Kalpa threatened to take “unspecified action” over the hiring of new pilots for its Boeing 737 fleet, KQ had to act fast.

Murithi had written to the airline seeking to stop the recruitment of the contract pilots, terming the move illegal.

“We hereby demand an immediate freeze of the hiring of the said contract pilots. In addition, we expect an official response of this intent within seven days of this communication, [failing which] which the association will take any action it deems fit,” Mr Nyagah wrote in his letter to Kenya Airways Chief Human Resources Officer Evelyn Munyoki.

The pilots are accusing the airline of wilful non-compliance with the CBA, something they say has become habitual and a reflection of the management’s attitude towards agreements.

“The association has taken note of the callous nature of the intent to forcefully recruit 20 contract pilots on the B737.

“Kindly take note that the management action is in breach of an existing memorandum of agreement on Kenyanisation and clause 37 of the collective bargaining agreement,” Mr Nyagah said.

On Thursday the airline’s director of operations, Captain Paul Njoroge, called the pilots’ bluff, noting that the airline will proceed with the hiring it had announced a fortnight ago for 20 contract pilots.

“We would like to recruit the pilots to ease the leave allocation and network expansion. As it is, some at KQ have more than 100 accumulated leave days, but with the current situation, we have not been able to grant them leave requests. It is for this reason that we are seeking to recruit the contract pilots,” Captain Njoroge said in his letter seen by Smart Company.

This capped a tumultuous week for the airline that saw it suspend its chief finance officer Hellen Mathuka, cancel two routes to Guinea and Benin and also open up about the expected nationalisation plans as it seeks to fly out of turbulent times.

And it is not just the pilots that are being haggled over. Mikosz is taking this opportunity to squeeze out terms on the CBA that is up for renewal.

KQ wants to renegotiate the terms under the 2017 CBA that the management says resulted in a 17 percent increase in average salaries for captains and first officers.

The management says the CBA is not pegged on performance, has imposed heavy perks, including travelling business class during duty travel, and a guaranteed monthly layover even when a pilot operates on routes with no layovers.

But even as the two sides lock horns on the contentious CBA, which is up for renewal, the airline management also revealed that the nationalisation plans are on course, with expected timelines yet to be agreed.

When the nationalisation happens, Kenya is expected to form a holding company, which will see KQ and the Kenya Airports Authorities as its key subsidiaries.

Here too, there appears to have been a well-thought-out plan where the government seems hell-bent on ambushing the taxpayer to buy back KQ from banks that willingly lent a broke private company knowing the risks too well.

First, the government wrote off a Sh24.7 billion loan that could have easily been converted into stake and watered down the shareholding of the bankers’ KQ Lenders 2017 Ltd, hold a substantial 38 percent of the airline.

It has only recently come to light that the David Pkosing-led Transport Committee of Parliament is considering a transaction where the government, instead of paying off the billions to lenders, would give them long-term bonds.

All these facts will be tabled in Parliament together with others in what is called an “omnibus amendment bill” next month and rushed through under the guise of avoiding the risk of triggering the $750 million guarantee, which the government issued to international creditors.

“The government has put in place a steering committee to spearhead the process of nationalising Kenya Airways, but we still don’t have a timeline on when this will happen,” Mr Mikosz said, adding that legal and policy reforms will have to be undertaken in order to ensure that the airline becomes fully State-owned.

The government, through the Treasury, owns 48.1 percent of the airline, with Dutch carrier KLM having 7.8 percent control.

Kenyan banks control 38.1 percent while the rest is owned by the public through listed shares at the Nairobi Securities Exchange.