Raila orders KQ to suspend layoffs

Prime Minister Raila Odinga has directed Kenya Airways to suspend the planned retrenchment of its employees expected to see between 650 to1500 employees lose their jobs.

In a twist set to revive debate on what powers the government has in interfering with operations of a public listed company in which it holds a significant stake such as Kenya Airways, Mr Odinga said the airline should prepare a brief explaining some of the issues raised by workers.

Employees of Kenya Airways had on Thursday petitioned the government to intervene in the impeding layoff after the Industrial Court lifted orders barring the airline from sacking its employees.

Through a letter signed by his permanent secretary Mohammed Isahakia to the airlines management, Mr Odinga said the petition had raised a number of pertinent questions regarding the planned retrenchment and whether the Company's is applying good corporate practice.

For instance, it is unclear whether Kenya Airways has explored all available options for reducing its wage bill including introducing pay cuts,” the letter read, adding that it was not clear whether the Company has engaged the Aviation and Allied Workers Union (AAWU) in discussions over the planned staff rationalization.

“Employees of Kenyan origin are facing retrenchment while jobs for foreign nationals performing similar duties are protected. In the recent past, similar Public Companies such as Orange Telkom Kenya that have undertaken massive employee retrenchment entered into negotiation with the workers union and agreed on a settlement package that was mutually acceptable to both parties and the Government,” the letter read.

It is not clear where the prime minister was drawing his powers, given that the airline said it was implementing a decision reached by its board of directors, in which the government is represented.

The government may however be riding on the fact the it is a key shareholder of the airline and its tag as being a national carrier to directly influence its decisions.

Kenya Airways on August 3 announced the terms of the staff rationalisation programme which will start with a Voluntary Early Retirement programme followed by a redundancy programme citing the need to ensure long-term sustainability of its business.

This prompted the workers union move the industrial court seeking to stop the airline's action on the grounds it had breached the labour relations act that require a firm to engage workers through their union before terminating their services.

The court had temporarily granted the orders which were lifted.

“Despite various initiatives that we have put in place, our cost base continue to be extremely high. This coupled with other direct operating costs, have put pressure on our contribution margin reducing our overall ability to operate profitably,” the airlines Chief Executive Titus Naikuni said in a statement released early this month.

Mr Naikuni said the decision, made by the airline’s Board of Directors following a harsh operating environment that is currently characterised by a downturn in passenger volumes, declining revenues, unstable fuel prices and an increasingly competitive environment.

Naikuni said the exercise started on August 1, 2012 owing to the large increase in headcount in 2011/12, significant annual staff salary increments, and costly decisions driven by the Collective Bargaining Agreements (CBA) negotiations with the staff unions driving labour costs to unsustainable levels.

Kenya Airways employment costs have more than doubled over the last six years, having risen from Sh6 billion in the year 2007 to Sh13.4 billion in 2012.

The number of Kenyan employees has grown from 3,729 to 4,170 during the same period, while the number of overseas employees rose from 425 to 664.

This comes just weeks after it outsourced a section of its staff, most of whom will be expected to run the yet to be launched low cost subsidiary—Jambo Jet--to a third party in a strategy to keep its wage bill low.