Painful steps KQ must take to roar, again

Medically speaking, Kenya Airways is in High Dependence Unit (HDU). Soon, it could end up in the ICU.

The Pride of Africa is not doing well. While many of its flights are being cancelled, others are delayed as much as three hours. Naturally, customers are not happy.

We are told that there are not enough pilots and that the powerful pilots union is to blame for blocking hiring of new aviators. It is also alleged that our aeronauts not only earn more but work less hours than their fiercest competitors. Further, that they interfere with any rescue plan that is being suggested.

Trade unions across the world have been credited with standing up to capitalism and changing economic structures, building middle classes, and ensuring rights of the people but at times they are a hindrance to employment and have brought down prosperous organisations.

Research (see DiNardo and Lee’s 2003 paper, Do Unions Cause Business Failures?) argues that unions raise the cost of labour by raising members’ wages above market rates.

Unions also impose other costs on employers, limiting discretion in hiring and firing for example.

They further argued that a key question for understanding the social costs of unionisation is whether the wage premiums and other costs of unionism create large or small distortions in the allocation of labour.

These distortions can take the form of reduced employment at unionised firms, or most dramatically, an accelerated pace of business failures.

The pilots’ resistance to hiring is analogous to someone intending to commit suicide given the fact that the business is operating in the negative.

The shareholders have already lost a great deal and the thought of nationalising the airline does not favour any of the stakeholders. Hardest hit will be employees.

In systems theory, there are three options that could be applied in the Kenya Airways changeover and drastically transform the airline sustainably into the future.

First is what I refer to as a Margaret Thatcher model. Under this option, some difficult decisions have to be made, especially the option of winding up the company and resetting under a different name. The model will have far-reaching political implications but will effectively deal with a strong union.

The second is one I refer to as a Lee Iacocca. Against all odds, Iacocca turned around Chrysler Motors from the brink of collapse in 1980s by making tough compromises.

With no choice, he made a deal with the US Government and told the union what it meant if they did not accept new terms to rescue a failing company. After lengthy discussions with the union, he made the shortest speech of his life to the negotiating committee: “You’ve got until morning to make a decision. If you don’t help me out . . . I’ll declare bankruptcy in the morning and you’ll be out of work. You’ve got eight hours to make up your minds. It’s up to you.”

Indeed, the union made the right decision by taking a pay cut and working with Iacocca to rescue Chrysler.

The strategy is to make it a union decision to choose between going home and accepting new terms.

This will be a more palatable strategy that will involve everyone and result in a win-win.

The last strategy is to keep on piloting new ideas and some suggested solutions like trying to get a strong partner. This is a defeatist strategy that will eventually fail because there isn’t sufficient negotiating power. The partner will have the airline, all for a song, and introduce new employee guidelines unfamiliar to the Kenyan workers with or without the union. Either way it will be the employees who will be hurt the most.

Kenya Airways is our collective national pride. Failure to rescue it will be a disastrous decision.

While I respect unions, there comes a time when national interests come first.