KQ to use Sh4.7 billion loss as defence in staff lay-off case
What you need to know:
- The new evidence is meant to support the airline’s claim that 578 employees were laid off as a cost-cutting measure.
- Kenya Airways, through lawyer Walter Amoko, argued that the report was a manifestation that the firm has more expenditure than revenue and had retrenched the staff as a measure to cut down on costs.
- On Tuesday, the national carrier’s management attributed the loss to declining passenger revenues, a strengthening local currency and escalating costs.
Kenya Airways is to use the poor result released on Tuesday as defence in a case where it has been sued by its former employees for wrongful dismissal.
The national carrier on Wednesday filed in court its half-year financial report that showed the business returned a Sh4.7 billion loss for the half year ending September 2012, against Sh2 billion after-tax profit recorded over same period in 2011.
The new evidence is meant to support the airline’s claim that 578 employees were laid off as a cost-cutting measure.
However the worker’s union, Aviation & Allied Workers Union (AAWU) that has sued on behalf of the employees, says they were discriminatively sacked, pointing to the fact that senior management were awarded a pay rise early this year.
More expenditure than revenue
Kenya Airways, through lawyer Walter Amoko, argued that the report was a manifestation that the firm has more expenditure than revenue and had retrenched the staff as a measure to cut down on costs.
On Tuesday, the national carrier’s management attributed the loss to declining passenger revenues, a strengthening local currency and escalating costs. (READ: Kenya Airways reports Sh4.7bn loss)
Mr Titus Naikuni, KQ’s chief executive, said: “We were unable to predict what was happening in the market place correctly, and this is one of the reasons we had to pull out of daily London flights.
We also suspended operations to Rome, Muscat and Zanzibar in order to reduce the loss-making routes.”
On Wednesday, AAWU lawyer Okweh Achiando protested, saying they need more time to study the report before they could respond to it as they had just received it.
Increased management’s pay
However, submitting on an earlier report by the Economic Planning Department in the Ministry of Labour on the airline’s financial status, Mr Achiando said that if the employees were redundant and were to be sacked in order to cut costs, then Kenya Airways would not have increased the management salary by 24 per cent and that of other staff by 33 per cent in 2011.
He also said that the high expenditure by Kenya Airways in 2009 to purchase fuel in advance that was to be used in the next three years was part of the over expenditure that might have reduced profit.
“These are expenses that had nothing to do with the employees and, indeed, the employees had no control over such decisions,” said Mr Achiando.
But Kenya Airways lawyer Amoko told the court that the parallel audit report by the employees was defective as it had heavily relied on information that was not obtained from Kenya Airways.
Hearing continues on Friday.
