KENYA Airways will spend Sh800 million to compensate employees affected by the on-going lay off, chief executive Titus Naikuni said yesterday. He said though the payment is likely to affect the airline's half-year results, the long term benefits are overriding. Naikuni said the airline would outsource some of its services previously handled by the laid off staff.
He said that most of the 578 staff sacked employees were from departments such as baggage handling targeted for outsourcing as part of cost cutting. The airline which is undergoing expansion said most of those retrenched were not from main operation departments like cabin crew but mostly loaders.
With a leaner staff, he said the airline expects to save Sh1 billion annually. “The industry is going through turmoil and you find that other airlines like Delta, Air France and Qantas have also made similar moves. It is not just KQ it is a worldwide phenomenon affecting the entire industry,” said Naikuni at a media briefing.
Out of the 578 staff sacked, only 126 opted to voluntarily retire forcing the company to pick others on performance and production criteria to meet its target of job cuts. Only one foreigner, the firm said, was declared redundant, though there were few others who left voluntarily.
Prior to the retrenchment, KQ had 4,800 employees according to the group HR director Alban Mwendar. The airline on Tuesday and Wednesday issued termination letters to select staff most of whom said they were shocked by their sacking. Some accused the airline of picking them on grounds of pregnancy and active participation in the union matters.
The Aviation and Allied Workers Union on Wednesday said the airline had targeted its officials and active members. However Naikuni has denied trying to weaken the union. “An employee whether or not is a union official, is still an employee first. We still recognize them (AAWU) and we still want to work with them,” said Naikuni yesterday.
The airline which is undergoing expansion said most of those retrenchment were not from main operation departments like cabin crew but mostly loaders. Analysts interviewed by Reuters said that, while the restructuring would dent Kenya Airways profitability in the short-term, it was expected to rebound on reduced operational costs.
"They will have a one-off expense which could potentially mean a substantial reduction in profits or (could lead to) a loss," said Eric Musau, an analyst at Standard Investment Bank "We assume the benefits will come later in a much more substantial manner."