Kenya Airways Begins Job Cuts Amid Nationalization, Virus Losses

(Bloomberg) --

Kenya Airways Plc started a three-month round of job cuts as lawmakers debate a bill to nationalize the carrier and its losses mount due to the impact of the coronavirus pandemic.

The process is expected to be completed by Sept. 30, Chief Executive Officer Allan Kilavuka said July 3 in a memo to employees, without providing the number of workers to be affected. When domestic flights resume, depressed demand for air travel will cut the number of workers needed for operations and some employees will proceed on unpaid leave from July 6, according to the memo.

“We have projected that demand is going to slow down to at least 50% between now and December,” Kilavuka said in a June 26 interview. “Our assets need to reflect that. Our operations need to reflect that, that goes without saying.”

The airline employed 3,734 people by end 2019, with a total wage bill of 13.5 billion shillings ($126.6 million). That accounted for 11% of the airline's total operating costs in the year, according to its annual report. Passenger flights accounted for 81% of the airline's revenue by the end of 2019, compared to 6.8% from cargo.

With the Kenyan airspace closed to most commercial passenger traffic since March, Kenya Airways estimates it will lose between $400 million and $500 million in revenue by the end of this year. If flights do not resume in July, the estimated losses will rise by at least 50%, Kilavuka said last month. In the interim, the airline's freight business has been moving 800 tons to 1,000 tons each week. Freight traffic in 2019 was just under 176 tons daily, nearly 19% higher than current levels.

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