National carrier Kenya Airways has announced the modalities of the staff rationalisation programme which will start with a Voluntary Early Retirement programme followed by a redundancy programme in a bid to streamline cost management.

Kenya Airways Chief Executive Officer and Group Managing Director, Dr. Titus Naikuni, said the decision by the airline’s Board of Directors was informed by the long term sustainability needs of the airline in 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.

“Despite various initiatives that we have put in place, our cost base continues 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,” he explained.

Kenya Airways employment costs have more than doubled over the last six years, having risen from Ksh.6 billion in the year 2007 to Ksh.13.4 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. The total number of employees stands at 4,834 at the end of the last financial year.

As part of the restructuring exercise, Naikuni noted that some positions will be declared redundant and in some cases the airline will have to outsource labour and services in some of the non-core functions of the airline due to the technical nature of the industry.

Naikuni also explained that Kenya Airways has adhered to the provisions of the Employment Act of 2007 and has issued one month notice to the respective unions, the Ministry of Labour and the employees.

He assured all investors that the airline will forge ahead with its 10 year growth strategy despite the few adjustments that may be occasion by the on-going restructuring programme.

An Employee Assistance Program has been in put in place to assist employees who choose to take up the Voluntary Early Retirement option. The program benefits include: access to professional counselling services, and debrief sessions.  A career planning and training sessions will be organise for all employees leaving the company.

According to the International Air Transport Association, or IATA, demand for global air travel continued to face uncertain outlook as falling business confidence and the high possibilities of a global recession continues to overhang the sector. Global air travel rose 6.2% on the year in June, up from 4.5% in May, said IATA. The aviation industry is suffering amid global economic uncertainty—fuelled by Europe’s debt crisis—and high fuel prices.

However, adjusting data for seasonal factors, worldwide air traffic volumes rose only 0.3% month-on-month between June and May, reflecting the recent slowdown in demand for air transport as passenger load factors fell 0.1% in the same period.