TURBULANCE

KQ spends million in nationalisation legal fees amid salary cuts

This, as the airline remains deep in the red.

In Summary

•A total of Sh82.6 million in legal fees was owed to different law firms as of last year.

•It's net loss for the six months ended June 2020 widened by 67.3 per cent to Sh14.33 billion, blamed on Covid-19 disruptions on global travel.

Kenya Airways has spent in excess of Sh78.2 million in outsourcing legal services for the nationalisation strategy and litigations, even as the airline remains in losses.

The national carrier last week announced pay cuts which range from a maximum of 30 per cent and a minimum of five per cent (5%) for those earning above Sh45,000.

It has also announced a Voluntary Exit Programme(VEP) 2021 in a phased staff rationalization initiative to cut its wage bill, amid low revenues occasioned by reduced operations in the wake of the Covid-19 pandemic.

The carrier which has remained in losses for the past six years outsourced the services of Anjarwalla & Khanna Advocates to help develop a nationalisation strategy costing more than Sh38.2 million.

Part of the payment include invoice number 130909501 for $203,000(Sh22.4 million) and 130909504 for $143,000(Sh15.8 million), May 28, 2019.

Another law firm, TripleOKLaw LLP , was also paid in excess of Sh40 million for cases against staff(litigation), among them several redundancy cases filed at the Labour Court.

A total of Sh82.6 million in legal fees was owed to different law firms as of last year, even as the airline remains with an internal legal team.

Chairman Michael Joseph yesterday declined to comment to The Star's inquiries on the nationalisation process and developments at the airline.

"I’m afraid I must decline at this stage. Perhaps mid-Feb when we know more," he said in a message.

KQ, as it is known by its international code, has received Sh2 billion from the national government to help with its operations, currently at about 50 per cent since resumption of domestic and international flights on July 15 and August 1, last year, respectively.

Group managing director and CEO Allan Kilavuka last week said the carrier is on a “cautiously optimistic recovery and rebounding journey.”

“We will forge ahead with our plans for 2021 with determination. However, we are mindful that the new Covid variant will result in new travel restrictions, significantly affecting passenger numbers in our key destinations,” he said in an internal communiqué.

The proposed salary cuts across the company are effective January and should run for at least 6-12 months, with a quarterly review of the proposed pay variation, Kilavuka has noted.

The salary used to determine the pay ranges is the staff's basic pay and all fixed allowances.

Staff owed in deferred pay that has been accrued since April 2020 will also have to wait longer to get their monies according to management, which says the company does not have the financial ability to pay the owed deferred salaries at this time.

“I know that this is not the response that many of us may want to hear; however, I must stress that we cannot pay these amounts, and further, we do not have a timeline when payment will be possible,” Kilavuka notes.

Management is pushing a VEP, which commenced on January 8, with an application deadline of this week Friday (January 22), targeting staff with one-year continuous service in the airline.

Terms include exit package equivalent to17 days pay for every completed year of service.

“You putting yourself forward for this voluntary exit program means that we are able to preserve more jobs for those among us who may not be ready to consider such a transition right away,” the company has told its staff.

Last year, the airline served more than 182 pilots and about 400 cabin crew with redundancy letters.

KQ financial troubles however date back pre-Covid as it posted year-on-year losses, for the past six years, blamed on poor management and ambitious expansion plans such as ‘Project Mawingu’ in 2011, that failed to materialise.

The struggling national carrier has been relying heavily on debt to finance its operations.

It's net loss for the six months ended June 2020 widened by 67.3 per cent to Sh14.33 billion, blamed on Covid-19 disruptions on global travel.

The carrier grounded its passenger flights last year when the government temporarily stopped international travel to contain the spread of coronavirus.

During the period, focus shifted to cargo where some passenger aircraft were converted into freighters.   

KQ reported a gross loss of 12.98 billion for the financial year ended December 31, 2019, which was a 71 per cent dip from Sh7. 55 billion loss the previous year.

Its worse loss was however in 2016 when it reported a Sh26.2 billion loss after falling deeper from the Sh25.7 billion loss reported in 2015.