Kenya Airways suspends bonuses as staff cause flight disruptions

Kenya Airways suspends bonuses as staff cause flight disruptions

Kenya Airways has delayed the payment of staff bonuses for the year ending December 2023, at a time when the airline has suffered widespread flight cancellations and delays that will affect its sales in the short term.

The airline, known as KQ for its international code, attributed the flight disruption to a shortage of cabin crew and aircraft engine parts, as well as sabotage by some of its employees.

“As you all know, we get all of our funds from our operations. Despite our best efforts, our revenue and cash flow are 15 percent below our projections. “We are behind our targets due to a combination of lower passenger numbers and disruptions to our flight schedules,” KQ CEO Allan Kilavuka wrote to staff on May 15.

“Unfortunately, due to these cash constraints, we have been forced to delay the 2023 incentive payment… originally scheduled for the May 2024 payroll. This delay affects us all.”

Kilavuka added that the company will provide an update on the payment schedule by June 20 if the airline has not disbursed the bonuses by then.

The company says several Boeing 787 Dreamliner engines needed to power its entire fleet are in the shop awaiting parts needed to repair them.

“This requires a significant payment to suppliers; otherwise we will not be able to maximize fleet availability and will therefore further worsen the cash shortage situation,” Kilavuka said.

The company does not disclose how much it pays in bonuses to staff, but employee compensation is one of its largest operating costs.

KQ saw its total personnel costs rise 39 per cent to Sh17.5 billion last year as it hired an additional 598 employees, expanding its workforce to 4,828.

Salaries were the largest item in remuneration expenditure in 2023, followed by “other personnel costs” at Sh2.3 billion and retirement benefits at Sh609 million.

Despite the expanded workforce, the airline says it has continued to suffer from a shortage of cabin crew and indicated that some of its flight disruptions are also due to sabotage.

“Avoid disruptions: I would like to urge all those deliberately disrupting flights to stop due to the impact they are having on revenue and cash generation,” Kilavuka wrote of the actions the airline has identified to survive the crisis. of liquidity.

Kilavuka said that in addition to postponing the bonus payment, the airline has also identified other cash conservation measures, including suspending all discretionary spending and capital projects.

The company also plans to sell non-core assets.

KQ’s flight disruption had been building and intensifying over the weekend, exposing it to a surge in refund requests.

The airline has a policy that allows customers to request refunds for flights canceled or delayed by more than eight hours.

Customers who do not want to travel after missing their original departure time can request a refund through their original payment method.

KQ declined to answer questions about the extent of the disruption to its flights.

However, this publication independently established that dozens of flights had been delayed or canceled since Sunday.

The canceled flights include flight KQ404 from Nairobi to Addis Ababa on May 19, KQ262 from Nairobi to Antananarivo on May 16, KQ 418 on May 20 from Nairobi to Entebbe and a flight that was initially scheduled to depart Nairobi to Paris on May 19. at 11:50 p.m. it was also canceled.

The airline also canceled KQ514 on May 19 from Nairobi to Accra and KQ 726 on May 19 from Nairobi to Lusaka.

KQ reduced its net loss by 40.6 per cent to Sh22.6 billion in the year ended December 2023, helped by an increase in revenue.

The company had made a net loss of Sh38.2 billion the previous year. KQ increased its sales by 52.8 per cent to Sh178.4 billion as it rebuilt its route network and capacity from the depths of the Covid-19 pandemic that hit the global aviation sector.

The interruption of flights risks slowing down the momentum registered in 2023 for the company that has been struggling for years to get out of the loss zone.