Qantas's Future?
Competing as an international carrier, is Qantas doomed to failure principally due to its labour costs?
It is clear that the CEO isn't very popular on this forum right now. I imagine some people might suggest that if Qantas is failing or even doomed, that the CEO is the principal reason.
Maybe so. That aside, two years ago, a PPRuNe member pointed towards labor costs a big issue, even though at the time the focus of the posting was on the high AUD:
http://www.pprune.org/australia-new-...about-aud.html
The AUD has dropped since then, but the average employee cost of Qantas is still significantly higher than its international rivals.
How can Qantas compete in this situation? With the knowledge that your airline's labour costs were significantly higher than that of your rivals, if you had the power to make changes, what would you do?
I read a lot of criticism in PPRuNe on how the airline is being run today, but most people would agree that running an airline is a tough job at the best of times. Qantas's situation is serious. What do PPruners suggest and how will this offset a fundamental labour cost problem?
When Alan Joyce commenced as CEO he stated that he wanted only 6 levels of management/supervision between the employee on the floor and the CEO. "Only" 6? In view of companies of a similar size by employee, it's about 1 too many. Further, in various sections of Qantas that number is higher than 6. The last AGM revealed a staff to management/supervision ratio of 2.1:1 - ie 32% of QF employees are management/supervision. Typically, supervisors and management are paid more than staff. Do you think "too many chiefs and not enough Indians" might skew the "average" labour costs at QF? The plan is to sack 5,000 employees - 1,500 of which are management. 1,500/5,000 = 30%. If, as is the company's contention, that the "pain" will be widely spread, the sackings do NOTHING to address the top-heavy management/supervision structure OR to lower "average" wage costs in the short term OR the labyrinthine structure of almost 200 subsidiary companies and entities that make up the QF Group.
A quick comparison of just two first-world airlines chosen at random, quite different in geography and size, one smaller and one larger than QF Group, but both have a mixed fleet ranging from widebodies to small regionals similar to Qantas:
Air NZ 105 A/C, 11,000 employees: 105 staff per airframe.
AA (including American Eagle) 851 A/C, 89,900 staff: 105 staff per airframe (after Chapter 11 ructions & mass sackings).
Now for Virgin Australia including Tiger: 107 A/C, 8773 employees: 81 staff per airframe. Breaking it down:
- VA: 94 A/C, 8,423 staff: 89 employees per A/C (within cooee of QF, AA & NZ)
- Tiger: 13 A/C, 350 staff: 27 employees per A/C (but how much work is done by VA Tigerair in SIN?)
Compare this to Qantas: Group-wide, QF has 33,000 staff for 317 A/C: 104 staff per airframe. It looks comparable to AA & ANZ but let's break it down:
Jetstar Group has 7,000 staff for 116 A/C: 60 staff per airframe.
Qantas Group (everything but JQ): 26,000 staff for 201 A/C: 129 staff per airframe.
There are lies, damned lies and statistics, but the numbers speak for themselves. Clearly the red-tail half of the airline has too many staff compared to AA, NZ & VA. But I'll risk drawing a long bow and suggest that JQ has too few staff per airframe compared to "real" airlines of similar size, namely VA. It adds weight to the suspicions of many that:
1. JQ Group simply could not operate without the efforts of QF mainline staff
2. QF Group is over-complicated and over-managed