NAIROBI: Kenya Airways, which is shedding hundreds of jobs through voluntary redundancies, said on Thursday the process would affect its first-half results, but it expected to benefit from lower operation costs in the long-run.
The airline, 26.7 percent owned by Air France KLM and one of the largest carriers in Africa alongside Ethiopia Airlines, said it would shed 578 employees through voluntary retirement, redundancies and outsourcing of non-core roles.
The aviation sector is under pressure due to rising staff and fuel costs, with many airlines pursuing cutback measures to offset anaemic economic growth in Europe and fierce competition.
Chief Executive Officer and group Managing Director Titus Naikuni told a news conference the restructuring process would cost the firm 800 million shillings ($9.48 million).
"Our revenue is not growing as fast as we had anticipated. We need to look at our costs ... These costs will show in the first-half results," said Naikuni.
"We believe that after this exercise on labour cost, we should be able to deliver a sound business going forward."
Kenya Airways said its wage bill had more than doubled over the past six years to 13.2 billion shillings, while the total number of staff has risen by more than 16 percent to 4,834.
Analysts said that, while the restructuring would dent Kenya Airways profitability in the short-term, it was expected to rebound on reduced operational costs.
"They will have a one-off expense which could potentially mean a substantial reduction in profits or (could lead to) a loss," said Eric Musau, an analyst at Standard Investment Bank
"We assume the benefits will come later in a much more substantial manner."
Kenya Airways posted a 57 percent drop in pretax profit for the year ended March 2012 to 2.15 billion shillings, hobbled by a sharp climb in its costs.
Besides shedding employees, which Naikuni said would save the airline 1 billion shillings annually, Kenya Airways has also discontinued loss-making routes to Rome and Muscat and reduced frequencies of some routes.
Its share price is down 32.6 percent year-to-date to 13.30 shillings at 10.10 GMT, the worst performer of the main NSE 20-Share index.
Comments
Comments are closed.