PROFITS CONTINUE TO soar at Kenya Airways, but the newly privatised carrier has outlined a major round of cost cuts following the court award of a massive pay hike to pilots.
The pay award, which virtually doubles salaries, came after the airline's 108 pilots referred a pay dispute to the industrial courts. The award is backdated for two years.
Kenya Airways was forced to put aside KShs411 million ($7.1 million) to cover the back pay in its financial year to the end of March.
The management has moved quickly to offset the cost of the settlement with cuts elsewhere. Off-line offices in Hong Kong, Los Angeles and New York will be shut, while routes to Frankfurt and Zurich are to be abandoned.
Kenya Airways was in the process of reviewing its network in the light of its partnership with KLM. The Dutch carrier took a 26% stake in the airline as a forerunner to the flotation on the Nairobi stock exchange earlier this year.
"Our initial studies show that considerable benefits will flow from integrating our network with KLM and its partners early in 1997," says managing director Brian Davies. Two new Boeing 737-300s have been ordered for delivery at the start of 1997 to help develop the airline's growing African network.
Before the cost of the pilots pay deal, pre-tax profits stood at just under KSch2 billion, more than doubling the performance a year ago. With sales up at KSch10.3 billion, that represents a pre-tax margin of close to 22%.
Source: Flight International
