The troubles facing national carrier Kenya Airways show no sign of abating following reports that company Chief Executive Allan Kilavuka has revealed that the airline is deep in the red and is unable to fully service its debts
In a letter to employees, Kivaluka informed members of staff that the company would be slashing employee salaries by between 5 percent and 30 percent for employees earning Ksh45,000 and above.
“We listened to your feedback to consider using pay ranges as a variation of pay rather than Hay grades due to the significant pay discrepancies across several grades. We, therefore, propose that the variation of pay across the company be based on pay ranges. The salary used to determine the pay ranges is your basic pay and all fixed allowances,” said Kivaluka.
According to the CEO, the company finds itself in a perilous financial position and is unable to pay any accrued amounts and is unable to lay down a timeline of when the workers will be paid.
“We cannot pay these amounts, and further, we do not have a timeline when payment will be possible. Our proposal, however, is that, as soon as we get a sustainable cash injection that can cover our overdues, we will, at that time, commence discussions on the payment of the deferred salaries. Similarly, should our financial situation and ability to pay improve significantly, we will redeem the deferred amounts,” he added.
Besides struggling to pay employees, the national carrier is unable to pay its suppliers after the government declined to inject capital as requested by the company’s management.
“I have previously communicated that the company has been struggling to meet its financial obligations. We owe our service providers and you, our employees, significant amounts. Our financiers and the Government of Kenya are also challenging the deferred pay arrangement as it is unsustainable,” he says.
“In December 2020, we informed you that our company debt had reached unsustainable levels, leaving us with no option but to stop further accruals. We have been in discussions with our existing suppliers to give us concessions on the existing debts and reduce monthly payments from now on. A number of them have already agreed to do so”.
In January, the government dithered from its earlier stance by committing to pumping more resources in order to assist the loss-making airline move its operations back to profitability.
This was a walk back from May last year when the government snubbed KQ’s request for a Ksh7 billion bailout throwing the company’s financial future into uncertainty.
In the last financial reporting period, the company reported a Ksh14.3 billion loss for the half-year ended June 30, 2020, representing a 67% increase from the Ksh8.6 billion loss posted at a similar period the previous year.
Cutting on Costs
In August last year, the company revealed that it was planning to sack at least 207 of its 414 pilots over the next three years as part of its plan to cut on costs after being hard by the COVID-19 Pandemic. The company also floated the idea of paying the pilots per flight.
In the full year ended December 2019, the airline reported a Ksh12.9 billion loss.
The pay cuts announced by the company will not be the first time the company will be effecting salary cuts Post- Covid.
In March last year, the company announced upto 80% pay cuts for senior management and 25% pay cuts for juniour staff.