Struggling national carrier Kenya Airways (KQ) plans to lay off a significant number of employees in yet another attempt to remain afloat.
Battered by the impacts of the Covid-19 pandemic that has hurt the aviation industry and awaiting an uncertain nationalisation process, the airline said it is unable to fulfil its obligations and maintain operations in the current environment.
Effectively, the airline’s only hope for survival in the short and medium-term is inevitably pegged on reduction of operations before beginning to scale up again.
“A decision has been reached to carry out an organisation-wide rightsizing exercise which will result in a reduction of our network, our assets and our staff. Effectively, we have commenced a phased staff rationalisation process, which we expect to conclude by September 30 2020,” said KQ chief executive Allan Kilavuka in a memo to staff.
He added that with the suppressed demand for air transport occasioned by the pandemic, a large part of the airline’s fleet will remain grounded even after it resumes gradual flights intended to commence in August.
“We will also operate a reduced network when we resume our services as we anticipate that it will take some time before the industry starts to rebound,” added Mr Kilavuka.
Prior to the pandemic, the struggling airline had a workforce estimated at 4,000 and operated a fleet of 36 to 54 global destinations.
KQ’s stock has been suspended from trading on the Nairobi Securities Exchange for three months effective July 3 to pave way for the planned takeover by the government following the publication of the National Management Aviation Bill 2020 on June 18, 2020.
Kenya’s parliament approved the nationalisation of the loss-making airline as a way of saving the national carrier from the noose of bankruptcy.
Under the plan, the government will also create a special purpose vehicle—Aviation Holding Company (AHC)—to manage Kenya’s aviation sector.
The AHC will have four subsidiaries—Kenya Airways, Kenya Airports Authority (KAA), Jomo Kenyatta International Airport (JKIA) and a centralised Aviation Services College— which will be run independently.
KQ is facing a financial crisis that has seen it halt route expansion and embark on a review of the existing ones, with a view to abandoning and reducing frequencies on what it considers to be non-profitable flights.
The airline, which is grappling with a negative working capital of $391.5 million, saw its net losses for the year 2019 widen to $129.7 million from $75.8 million in 2018.
Staff costs in 2019 rose by $9.1 million to $158 million as the carriers total operating costs surged to $1.3 billion on the back of increased operations and changes in accounting estimates.