Dixon's daring but dangerous strategy

[Wirraway]

This is just one of 3 articles in todays (Sat) Australian Financial Review relating to QANTAS, the other 2 which are locked and
you will need to get a copy at your favorite newsagency, the 2
not pasted headers are:


1. Why Qantas really needs to cut it
Qantas faces the challenge of slashing costs by $1 billion as it strives to respond to the daily exigencies of global aviation. By Jane Boyle (Jul 05) »

2. Geoff Dixon: oxygen is required
Growing competition, ageing aircraft, union and bureaucratic hangovers, punctuality and satisfaction issues ... are the Qantas chief's Wagga-nomics up to the job? By Adam Shand (Jul 05) »

Update: Have now posted all 3 articles.

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Sat "The Australian Financial Review"

3. Dixon's daring but dangerous strategy
Jul 05
Ben Sandilands

As federal parliament rose for the mid-year recess, a bill that threatens to reduce the cabin safety standards of Australian air travel slipped under the radar. The Civil Aviation Legislation Amendment (Mutual Recognition with New Zealand) Bill 2003 caught the Opposition fully occupied with the "rest of Telstra'' sale bill. But the Mutual Recognition package is seen by the unions as a potentially desperate bid by Qantas to cut its costs by halving the salaries of some pilots and slashing cabin crew numbers.

It means that from December 31, each country would recognise the other's Air Operator Certificates (AOCs), allowing their airlines to operate in both countries under the Single Aviation Market agreement.

The legislation, mirrored this week in the New Zealand parliament, is as vital to Geoff Dixon's vision for Qantas as the proposed Air New Zealand alliance that has been frustrated so far by each country's competition regulators. Among the main consequences of the bill, if it is passed, are two sets of standards for cabin safety.


Qantas and Virgin Blue would be bound by Australian rules, requiring one flight attendant for every 36 passengers.
Jet Connect (formerly Qantas New Zealand, and 100 per cent owned by Qantas) would, like Air NZ and FreedomAir, be able to fly with one attendant per 50 passengers.

Because New Zealand AOCs do not permit the use of sky marshals, Jet Connect would not only be more dangerous in the event of a survivable crash landing or fire, but a potential magnet for terrorists or hijackers.
Australia could permit airline operations that do not meet the standards of the United States, Canada and the European Union.

The Flight Attendants Association of Australia and the Australian and International Pilots Association are preparing to strike if necessary. They say Qantas is moving with Jet Connect to apply the lower labour and safety standards of New Zealand to its domestic and (later) international operations. The strategy is being described by both unions as the aviation equivalent of a maritime flag of convenience to slash shipping costs.

The FAAA is angry that the bill slipped past a holiday-bound House of Representatives only weeks after the FAAA celebrated its now hollow triumph over Qantas in having the Australian safety regulator, the Civil Aviation Safety Authority, reject its application to dilute the cabin crew ratio in Australia to the NZ level.

Inside Qantas, critics of chief executive Dixon say this is his last chance to push through meaningful cost cuts to counter disquiet over a massive capital expenditure program and the robust performance of Virgin Blue. They claim Qantas has not seriously addressed the consequences of Virgin Blue's bringing the runaway success of low-cost carriers like Ryanair, JetBlue and Southwest to the Australian market.

But for Dixon's team, Jet Connect, with or without an AirNZ alliance, is the master stroke that will force the drastic productivity and work practice changes onto Qantas that they have so far failed to achieve.

Qantas insists that it has no plans to fly Jet Connect on Australian domestic routes, but will use it from September to undercut the cost base of its Australian-based jets on trans- Tasman routes.

This was made clear to the pilots by Qantas executive general manager, operations, David Forsyth, at a recent meeting about the initial plans to use Jet Connect between both countries.

Nothing would stand in the way of major structural cost reforms, Forsyth told the pilots. He said Jet Connect's fleet of seven 737s would be deployed as two aircraft across the Tasman, four within New Zealand and one as a maintenance spare.

But only until December 31 - now revealed as the date Jet Connect or any other New Zealand carrier will be free to fly domestic routes in Australia against Virgin Blue, and to attack the conditions of higher-paid Qantas staff.

The once docile AIPA, which was largely formed by those who did not support the domestic pilot strike of 1989 by the Australian Federation of Air Pilots, has been galvanised by the bill. Its executive is likely to meet this week after key members return from duty abroad.

Jet Connect captains are paid about $95,000 a year; there are no "on-costs'' for benefits like superannuation or sick leave, which must be self-funded. Virgin Blue captains earn about $140,000 and receive on-cost benefits worth an extra 20 per cent. Qantas 737 captains make about $190,000 plus 25 per cent on-costs.

Transport Minister John Anderson and his NZ counterpart Harry Duynhoven issued similar media statements. Anderson said: ``It will not affect the safety of aircraft operations. Australia and New Zealand both have extremely high safety standards which are consistent with international best practice for airline operations using large capacity aircraft.''

In fact, the NZ standard is not permitted in most of the world, including the US, the EU and, until or if the bill is passed, Australia.

The FAAA's safety and regulatory officer, Guy Maclean, says: "The New Zealand requirement is one attendant for every 50 passengers, while the American and European rules are one for every 50 seats. This is a crucial difference. It makes the NZ standard lower not only than Australia's but the European Union and the US. The present Australian standard shares the honours as being the world's highest with Canada.'' Maclean says the Australian industry has never contemplated having less than one flight attendant for every main door on a jet.

Jet Connect would break this vital ratio by operating with only three flight attendants for the four main doors in its 737s.

Under US law, airlines are prohibited from flying with fewer flight attendants than they used to obtain their certification by physically demonstrating the evacuation of a fully loaded jet in 90 seconds through half the available exits.

The captains who spoke out on this issue were even more forceful. One, speaking on condition of anonymity, said: ``You will have Jet Connect with only one flight attendant at the rear of the cabin between two main doors.

"In an emergency, with smoke, flames and panic, that one person has to manhandle two doors and sets of slides and try to direct dozens of people with only minutes to avoid being burned to death."

"If even one door or slide fails the way two did on the Qantas emergency at Sydney this week that one flight attendant is in an impossible situation."

"This is bloody-minded, silly accountants' nonsense.''

It would also mean CASA tolerating a situation where those sitting in the really cheap seats on Jet Connect would be deemed unworthy of the standard of safety for those paying more for a Virgin Blue or main-line Qantas service.

According to a CASA spokesman, the new regimen is "all about equivalent safety outcomes, not the number of flight attendants''.

But this is contrary to CASA's own rulings on the Australian standard not to mention common sense.

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