Nairobi Securities Exchange (NSE):
Kenya Airways Ltd (NSE:KQ)’s woes could multiply if the government delays the backing of the Sh10 billion the carrier needs to go ahead with the planned mass layoff of staff. The debt-laden airline last year negotiated a Sh20 billion loan from African Export-Import Bank (Afrexim). But it has only been able to access half of the loan.
The loan balance of Sh10 billion requires the backing of the Kenyan government before it can be released. But nothing has been forthcoming and the layoff of 600 workers by Kenya Airways Ltd (NSE:KQ) that was planned to kick off last month is now behind schedule. With that, the airline could end up incurring more losses or accumulating more debts that could further complicate its turnaround.
Sh2 billion annual savings
Kenya Airways Ltd (NSE:KQ)’s massive retrenchment is aimed at helping the airline to cut its operating costs so that it can return to profitability. The company’s payroll expenses ballooned in the five years between 2011 and 2015 to reach Sh16.96 billion. Eliminating 600 positions as planned is expected to enable the carrier drop Sh2 billion annually in payroll expenses. KQ had 3,973 employees as at March 2015.
Kenya Airways Ltd (NSE:KQ)’s massive retrenchment is aimed at helping the airline to cut its operating costs so that it can return to profitability. The company’s payroll expenses ballooned in the five years between 2011 and 2015 to reach Sh16.96 billion. Eliminating 600 positions as planned is expected to enable the carrier drop Sh2 billion annually in payroll expenses. KQ had 3,973 employees as at March 2015.
No retirement option
The cash-strapped Kenya Airways Ltd (NSE:KQ) did not give its staff the option to choose between going on early retirement and retrenchment. But, with the delays in the release of the second installment of the Sh20 billion bailout loan, the company is likely to incur more payroll expenses, thus prolonging its restructuring process.
The cash-strapped Kenya Airways Ltd (NSE:KQ) did not give its staff the option to choose between going on early retirement and retrenchment. But, with the delays in the release of the second installment of the Sh20 billion bailout loan, the company is likely to incur more payroll expenses, thus prolonging its restructuring process.
Kenya Airways Ltd (NSE:KQ) has posted a string of losses in the recent years as the company struggles with fierce competition from more efficient international rivals and runaway operating costs due to a bloated workforce.
Shares of Kenya Airways Ltd (NSE:KQ) closed at Sh3.95 on Monday, a far cry from their one-year high of Sh7.90.
Nairobi Securities Exchange (NSE):
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