Kenya Airways announces successful completion of Voluntary Early Retire Programme and Staff rationalization Exercise

Kenya Airways announces successful completion of Voluntary Early Retire Programme and Staff rationalization Exercise
Thursday, September 6, 2012…National carrier, Kenya Airways has announced the completion of its staff rationalization programme that will see the airline save close to Sh1.2 billion annually in labour costs as it embarks on its ambitious expansion programme.
According to the Chief Executive Officer and Group Managing Director Dr. Titus Naikuni, the staff rationalization program has been a success with 126, or 21 per cent, of the estimated 600 members of staff that will leave the airline volunteering to take up the company’s attractive layoff package.
 “We followed the labour laws to the letter, and looked around at what is happening in the marketplace in Kenya and Africa and packaged the best and most fair deal for our employees,” said Dr. Naikuni. “Our programme is generous to those affected from both a severance and provident perspective. Those leaving the business will have an estimated average pay-out of up to Ksh. 2 million.”
Kenya Airways is also offering job and business training services to all those affected at company cost to ease their transition into new jobs or self-employment.
The airline, which is one of the most successful carriers in Africa, plans to more than triple the number of its aircraft from the current 35 in the next 10 years. The company said it will also take bank loans to finance the 10- year expansion plan that will cost $3.6 billion in the first five years.
“The Company also recognizes the need to rationalize the current business in order to create a platform for the planned growth of network and fleet”, said Dr. Naikuni. 
Dr. Naikuni said that having considered the business environment, the Board approved a Voluntary Early Retirement Programme, and a staff rationalization exercise to address internal inefficiencies, and reduce the employee cost base of Sh13.4 billion by 10-15 per cent.  
“Over the last few months the company has revisited cost structures, reviewed processes, increasing efficiencies in order to mitigate decline in profitability, whilst maintaining and growing customer satisfaction,” he said. 
Though the airline industry enjoyed a good ray of sunshine in the immediate aftermath of the Global Financial Crisis in 2008 and 2009, the last two years have been particularly tough as the effects of the Eurozone debt crisis and recession have reduced travel demand globally. The high level of political risk in the Middle East last year pushed fuel costs to unsustainable levels. Local interest rates have also risen dramatically during this period adding to a potent mixture of rising labour, energy and finance costs which has reduced the earnings outlook for the global airline industry. 
“It is in this context that Kenya Airways’ cost base has grown disproportionately to our revenue generation,” said Naikuni, “Our employee cost/person has doubled in five years due to salary increases linked to union awards and job evaluation.”  
Naikuni said the employment costs doubled over the last 5 years, having risen from $71.5 million in the year 2007 to $160 million in 2012. He said the number of Kenyan employees has grown from 3,729 to 4,170, -of which 46 are Kenyans working abroad,- during the same period, while the number of overseas employees,- mainly nationals of their respective countries,- rose from 425 to 664, bringing the total number of employees at the airline at 4,834 at the end of the last financial year.  

SOURCE:KQ website press release