KQ runs into strong headwinds as pilots begin deboarding

Kenya Airway (KQ) pilots have filed a trade dispute with the Labour Ministry, seeking arbitration over the move by the national carrier to recruit foreign pilots on contract.

The airline recently picked a fresh fight with its pilots after it announced that it plans to hire 20 pilots on two-year contracts to fly its Boeing 737 fleet.

Under the aegis of the Kenya Association of Kenya Airline Pilots Association (Kalpa), the local pilots said Thursday that KQ had contravened some clauses in the Collective Bargaining Agreement (CBA), especially on Kenyanisation that renounces employment of foreigners at the expense of locals.

“The CBA says you cannot bring in direct entry pilots at the expense of local personnel who are within the company and can be able to take up those positions,” said Kalpa Secretary-General Murithi Nyagah (pictured) in an interview.

“The CBA is a legally binding document for both parties who are signatories… as it is right now, we’ve filed a trade dispute on the matter.” KQ has, however, defended its decision, saying it would enable it to increase its talent pool and plug the crew shortage serving its 737 fleets.

The airline faces a pilot shortage where 414 pilots have been operating a schedule that requires approximately 600 pilots. Mr Nyagah insisted that local pilots must be hired on a permanent and pensionable basis and also lamented the slow recruitment process by KQ.

The airline recently said the pilot shortage has resulted in an annual loss of Sh5 billion.

Kenya Airways in August this year reported a first-half pretax loss of more than double from a year earlier to Sh8.56, signaling tough times ahead for the troubled line. The airline’s operating costs however, rose to 61.45 billion shillings, from 53.22 billion shillings in the same period last year.

The Kenyan government is in the process to renationalize KQ, as it is known by its international code name with the hope of saving it from growing debts.

Kenya’s parliament voted in July to renationalize the loss-making airline, which is laboring under a mountain of debt and has had three changes of chief executive in the past five years as it struggles to compete with regional rivals.

The debt restructuring plan which also include an Open Offer to its existing shareholders was initially sanctioned in August 2017 at an Extraordinary General Meeting (EGM) by minority owners, and marks a culmination of a journey that began in June of 2017 following prolonged negotiations between KQ and its lenders.

The proposed deal is expected to cut the company’s debt by Sh51billion as well as unlock new funding – with such a move to also see minority shareholders diluted by up to 95 per cent as a result of restructuring and employee offer. The deal will also mean a large equity capital increase and issue of new Ordinary Shares to stakeholders.

Under the financial restructuring of KQ, christened Project Safari, the state will now be the single largest shareholder at the airline – previously with 29.8 per cent stake, while 11 local lenders will control 38.1 per cent to be held in a special purpose vehicle called KQ Lenders Co.

Dutch carrier KLM, will now own 7.8per cent while minority shareholders will command a paltry 5.2 per cent in a new shareholding structure.

The arrangement will also see the state increase its seats at the airline’s board to three with the lenders having 2 seats at the board, while KLM will have one person representing its interests at the airline.

The airline’s existing shareholders will also be given the opportunity to reinvest in the company and acquire further new ordinary shares through an Open Offer which seeks to raise Sh1.5billion, after completion of the intricate restructuring process.

Additional Reporting By Standard