Thurs "Sydney Morning Herald" 20/2/03
Qantas staff need to check the exits
February 20 2003
Even with a doubled profit, the outbreak of war would clip the Flying Kangaroo's wings.
Qantas' chief executive, Geoff Dixon, is well aware that those in the financial markets aren't the only ones he needs to send a message to with the airline's interim results, out today.
He doesn't want unions to get carried away with a doubling in net profit to, on some estimates, as much as $350 million in the six months to December 31, 2002. With the prospect of a war in the Middle East, which would sap demand for international air travel, he wants to make sure costs are kept under control.
Hence, a contingency plan to shed about 2500 jobs, or about 7.5 per cent of the work force.
Dixon is clearly telling the unions that tough times still lie ahead and, if staff don't like it, they should take note of their nearest exits. Perhaps he may use the plan as leverage in wage negotiations.
It is hard to make comparisons with Virgin Blue, given it is a budget airline and doesn't offer higher-margin business class. But, analysts have suggested Virgin's labour costs are as much as 30 per cent below those of the Flying Kangaroo. Still, Dixon would love to close the gap on margins. In any event, the sharemarket doesn't tend to get too upset with industrial action at Qantas.
In the past Qantas has managed strike action very well and investors have been prepared to put up with a short-term disruption to revenue for the long-term benefits of a lower, or even just stable, cost base. As one fund manager mused yesterday: "The market would be quite happy to have no one other than a pilot on the plane".
Qantas shares rose 5c to $3.80.
Last edited by Wirraway; 19th Feb 2003 at 14:59.