Qantas Employee Costs - It's all about the AUD

[DrPepz]

Since everyone's going on and on about QF employee costs, I compiled the cost per employee for a basket of airlines: (Using Group consolidated accounts for each airline for 2010/2011 financial years)

http://img.photobucket.com/albums/v479/docpepz/AirlineEmployeeCosts.png

QF has the highest cost per employee, but that's largely because of the AUD. SQ and Delta have a tie on the second highest cost per employee, higher than NZ, much higher than BA and CX.

CX's cost per employee would look low right now (30% lower than SQ) because the USD, to which the HKD is pegged to, has depreciated by that amount against the SGD in the past 5 years. If the SGD:HKD rate stayed the same, SQ and CX would have the same costs per employee.

In fact, using 2006 exchange rates, SQ would have the second lowest cost per employee in that basket of airlines, instead of having the second highest. BA in turn would have the highest cost per employee (based on 2006 exchange rates) due to the relative strength of the pound then.

In local currency terms, QF employees have not faced a wage blowout. However measured in USD, they have, and any Australian employee's cost would look very expensive by world standards.

SQ's costs per employee also look very expensive compared to its peers, and it is no surprise considering that after the AUD, the SGD has been the best performing currency against the USD in the Asia Pacific region in the past 5 years. In fact from the people I know in the aerospace/aviation circles in SIN, the cost of a skilled engineer in Singapore these days is more than the USA.

[skybed]

the next graph Dr. Pepz should be management costs(and i am not talking about the CEO alone).then you take these costs out from consolidated accounts and then the picture would change somewhat greatly.:ok:
without doubt QF management cost would be amongst if not the hightest in the aviation industry.

[nitpicker330]

Ok good, so now compare where each company gets its revenue stream from.

[halfmanhalfbiscuit]

SMH claimed oz dollar appreciated by 80% in story about Alcoa. If your not in mining your in trouble.

[nitpicker330]

Qantas would get a lot more of its revenue paid in AUD than other carriers.

So I suggest your comparison above aint the whole story chum. :ugh:

[DrPepz]

nitpicker: Of course cost per employee doesn't tell even part of the story. However I just presented the information as it is. What I personally found interesting was that SQ has higher costs per employee than BA, NZ, CX and are on par with Delta - bearing in mind the American carriers also constantly claim their workforce is too expensive and Delta themselves use Singapore MROs to maintain their A330s.

While QF does get the vast majority of its revenue in AUD, on international routes, it is competing with airlines who have costs in a foreign currency and revenue in AUD. QF has costs in AUD and revenue in AUD.

Of course it doesn't help that QF is using aging 747s on international routes, and in any currency that will be an expensive venture compared to A380s and 777s!

Labour costs are definitely not the be all and end all. If not, SQ should have lost money for the last 10 years with costs per employee 2.5x that of MAS.

[andrewr]

The exchange rate is a problem for every industry that faces competition from overseas. Manufacturing, agriculture, IT, even things like accounting and legal work where you can ship the work electronically.

Aviation is actually in a better position than many industries, as you do have to be in Australia to transport someone from Melbourne to Sydney.

Mining isn't exempt. The exchange rate impacts any profits from mining exports kept in Australia. Mining profits that go overseas are not impacted so much, as they will be converted to/from the dollar at similar exchange rates...

[skybed]

Of course it doesn't help that QF is using aging 747s on international routes, and in any currency that will be an expensive venture compared to A380s and 777s!
correct, just imagine they would have replaced half of the aging 747 with 777.
places like DFW/FRA/NRT/ etc. might be (more)profitable. places like CDG/SFO/PEK/ LHR toPER,LHR to HGK might not have been scrapped.
deliberate destruction of an airline:{

[Sunfish]

...And when the AUD goes UP the cost of jet fuel in USD goes DOWN, then there are all those spare parts and consumables that get cheaper as well. Then there are the capital costs of the aircraft and borrowings, their cost in AUD just went down as well.

All this stuff is supposed to be taken care of by the Qantas Treasury who would be hedging everything.

To put that another way, when the AUD appreciated by 10%, does Qantas cut its prices by 10%?

Of course not, it just howls to the media about how expensive Australian staff are...

[ALAEA Fed Sec]

Thnx Dr Pepz for the info, although not good news for us trying to fight to retain employment here we need to face the facts. The strong Aus dollar does make it hard to compete on the labour front. I think our best asset is quality though so in Engineering the figures need to take into account many matters.

I estimate however that Qantas are collecting at least 85% of revenue in Aus dollars which for them is an absolute windfall. Whilst Qf compete with Cx, they aren't carrying as many Aussies on their aircraft as us in percentage terms however we still have to match their fares in a global market. Of course our Domestic revenue collection is all cream.

Qf's biggest Ops expenses are manpower (26%), aircraft (19%) and fuel (25%). The comination of the last two there of course benefiting completely from the strong dollar. Overall Qantas would be loving having the buck up because the 44% of their expenses that benefit exceed the 26% that don't.

They will of course continue to attack labour costs regardless of the dollar. I don't remember them demanding more work be done here when it was at 70 cents.

[nitpicker330]

Exactly Fed sec:ok:

Swings and roundabouts....... Certainly this isn't hurting QF and to make up a nice little table using only the exchange rate is too simplistic.

[nomorecatering]

This is what Oz is fighting against in a world market.

An ex student of mine is now an FO with China Southern on the 777. he's making 15,000 RMB per month. Thats $2500 AUD.

I think the days of QF salaries will draw to an end in the next decade or so. The same goes for all the legacy carriers around the world, they will gradually disapear. It's not a pretty picture, but is the reality.

Gone already, Pan Am, Sabena, Continental, Braniff, Swissair, Ansett and others long forgotten.

[Wally Mk2]

The trouble is with reducing wages to make a Co more profitable just means those effected (the employees) are still living in a world where prices only ever go up ! We all mainly only want higher pay top cover the day to day cost of just surviving! The likes of AJ don't need to be concerned that fuel for his car went up 10 cents a ltr last week, groceries going up all the time & with utilities sky rocketing he's got enuf money to cover all that & some!!. It's the guy at the coal face that brings AJ & the likes the silk lined life they lead who is suffering out there !
The only reall variable that the CEO's of the world have at their disposal to line their pockets with is the human element in the cost of running a business.

The world is like a merry-go-round there's no end to it !:ugh:

Wmk2

[-438]

What I find interesting (if these figures are correct) is that after 11 years service to Qantas mainline & as a B737 FO, I am only making slightly more than the average Qantas employee. I knew I was being underpaid.

[C441]

Are the figures pre-tax or post-tax and the same for each airline? Even a comparison of say Cathay and Qantas will make a significant difference to the figures dependent upon whether tax has or hasn't been accounted for.

[DrPepz]

I took them from the Group Consolidated Accounts under "Staff Expenses" or "Employee Expenses". All these expenses are pre tax (from the company's point of view) but include superannuation or provident fund expenses or their equivalent for each country. The figures are thus what each employee costs to the airline (this would include allowances, training programmes, superannuation etc), and do not represent the take home pay of each individual employee.

From the employee's point of view of course not the entire amount goes to them in their take home pay. Australia's superannuation is 9%, Singapore's is 16% etc. From a disposable income point of view, the average SQ employee on say SGD100,000 would have more post-tax income plus superannuation than the average QF employee on AUD100,000.

All in all there are a large number of factors that influence the costs of operating an airline including wage costs. EK can pay staff 30-40% lower than QF because there is no income tax in the UAE, resulting in staff having the same or even slightly more disposable income.

QF may complain that Australia is in a poor position for air travel being an end of the road country. But Australia is in a prime position to export minerals to China, compared to say Brazil which is too far away. As such, QF's complaints about their disadvantaged geography would be the same as Vale complaining they can't complete with BHP because Brazil is disadvantaged geographically.

[Ero-plano]

Are the QF bosses worth the value of over 100 Pilots. Shows where the cash goes.

Basic Compensation


Name$ Fiscal Year Total
Leigh Clifford (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=1032379)
$635,000
Alan Joyce (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=534934)
$5,008,000
Gareth Evans (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=1447949)
$1,357,000
Bruce Buchanan (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=1246375)
$1,413,000
Simon Hickey (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=853631)
$1,406,000
Brett Johnson (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=235727)
$1,254,000
Rob Gurney (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=1321801)
$1,405,000
Carla Hrdlicka (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=1629171)
$361,000
Lyell Strambi (http://www.pprune.org/finance/stocks/officerProfile?symbol=QAN.AX&officerId=1246372)
$1,695,000

[moa999]

Dr Pepz,
one could use that example in some other uses.

China and Dubai have no coal so they import it from countries that have a competitive advantage in coal production - Australia and Brazil
China and Dubai have a competitive advantage in flight crewing costs, so they export...

[Shark Patrol]

An ex student of mine is now an FO with China Southern on the 777. he's making 15,000 RMB per month. Thats $2500 AUD. I think the days of QF salaries will draw to an end in the next decade or so.

The thing that gets lost in this argument when comparing total wages is the buying power of the wage in the country involved.

I recently went to a 711 store in Bangkok and bought a can of Heiniken, two bottles of Lipton iced tea, a small bottle of iced coffee, two pieces of banana bread and a roll of mints - the total cost was 130 Thai Baht (about $4 AUS). I imagine that it would be difficult to buy a can of Heiniken, alone, for $4 in Australia. I have no research to support this, but I reckon that Australia must currently have one of the highest costs of living in the world.

If the buying power of your US dollar is four times higher in Thailand than it is in Australia (for example), then for the same lifestyle, you only need a quarter of the wage in US dollars. I would love to see someone convert the table at the beginning of this thread to take into account the buying power of the US dollar in each of the countries mentioned, so that we had a true comparison of apples and apples.

[pylet]

Qantas has the highest paid airline CEO in the world, why shouldn't Qantas pilots/employees reflect that?

What's good for the goose right? (literally)

[blow.n.gasket]

I think it was capt Kremin who posted some figures awhile ago reference Effective Full-time Employee per Airframe ratio's for different airlines.
If my memory is correct I believe the figures Capt Kremin gave for most airlines was a staff/aircraft ratio of close to 110 staff per aircraft.
However if I'm not mistaken the figure for Qantas was up around 200 staff per aircraft.
Almost double most other major airlines!
If these figures I've trawled up from my dim dark memory are correct, why haven't Qantas' executives, some of the highest paid airline execs in the world, tackled this obvious overstaffing issue?
Secondly if this really is the case ,where is all the "fat" at ? :confused:

[Clear_sky]

Hey Shark Patrol

I don't think people go to China because they like the cost of living in China. They go there to make MONEY to take home. China is a great place to visit but lets face it, it's a polluted, corrupt mess.

No matter how cheap the cost of living, $2500 per month is not giving you much of a kitty at the end.
China is not that cheap anymore anyway.

[TAC inop.]

Clear. That doesnt make any sense.
Either way, how can you make enough money to 'go home', or 'send home' ?
You are subject to the economy in which you are employed.
In Oz, we need the full dollar wage to survive.
Jezuz, 10 bucks a pint at the local!
In Arizona 5 years ago, I bought a 5 bedroom, 2 story house for 180 US....now, I ask you, what would that buy you in a city of 2 million people in Oz?

[shon7]

The cost comparison is meaningless unless you compare productivity per employee as it translates to the firms net profit.

[600ft-lb]

2 competing forces at work here.

Local employment on local rates

Or

Local employment on 3rd world rates

It's not difficult to see what an uninspired management want.

They want their cake and to eat it too, we're all too expensive in their eyes it withstanding the fact that the aud was $0.60 a few years ago and their staff costs were effectively half in the global arena of today. But of a contradiction when they want to charge Australian rates of fares to the traveling public and pay the management and board well well well above 1st world rates of pay with very low performance management bars set by the remuneration committee members of 'the board'.

I would really love to see what business plan gets the 'man' the job
1. Create a permanent state of fear for livelihoods for the staff
2. Insist in 'change' but don't state what that is
3. Retire qantas aircraft but don't replace
4. Gift routes to subsidiaries and foreign airlines
5. Guarantee 14 a380s total to the qantas intl brand only to service USA and singapore.
6. Send all the profits of the ludicrously profitable domestic side to new jetstar aircraft by the dozen and fund 3/4 new upstarts at the expense of the carrier generating the money.
7. Go to war with the staff because they see all of this unfolding as predicted and play their industrial tactics against it.

--- the next is yet to unfold but it's obvious

8. Continue the downsizing qantas
9. Move capital and assets offshore to new venture
10. Insist the local operation is unsustainable, sack them all.
11. Offer employment to sacked staff on new jq style contracts on less money
12. Live in a perfect world where everyone is a minimum wage airline slave, bonded employment for pilots, engineer and cabin crew, ala jetstar Asia cc and jetstar cadets/paying for type ratings.
13. Outsource all ground handling to the cheapest bidder rotating 12 monthly as they go out of business chasing the $150 per transit
14. Maintenance by cheapest offshore bidder in sin/mnl/china/hkg
15. Repeat step 1. on the now too expensive jetstar staff

But I can only guess that's how it goes.

[stubby jumbo]

Astute observations 600ft.

Create a permanent state of fear for livelihoods for the staff
Dixon kicked this off with his constant Chicken Little stories at staff briefings....AND if any one had the gall to ask a "probing question"-your arse would be booted by your Line Manager within hours of returning.


Go to war with the staff because they see all of this unfolding as predicted and play their industrial tactics against it
Some goose(s) ( in IR ??) must have been inspired by the writings of the Napoleonic wars. Smash through, Divide and massacre all resistance.



10. Insist the local operation is unsustainable, sack them all.
11. Offer employment to sacked staff on new jq style contracts on less money

Bingo !:D Economic rationalism at its best.

I am one of the "lucky ones" who managed to squeeze under the barb wire fence and get out of the joint. Let me tell you..... its great to be out.

My new employer recognises their people, pays for performance, communicates to us -in a manner that is human AND wants all of the staff to be part of their success.

Whats so F:mad::mad::mad:ng hard about that ????

Yes its a Global Company, Yes there 34,000 staff world wide, Yes they have(dare I say it-a legacy:hmm: from the past).
No its not an airline ,bank or mining company-its Communication based.

They say that a fish rots from the head..........well I reckon the rot @ QF is approaching the back dorsal fin.

I'm sure many of you may be saying ...."Well....Good Riddance Stubby Jumbo -F---K Off then"

Fair Enough. But after 25 years at one place- and leaving -I reckon I've found the bit that has been missing in my working life for the last 10 years at QF.

That is:

NOW......I HONESTLY ENJOY COMING TO WORK :O

[Normasars]

Touche Stubby!

I have stated it many,many times on here before.

The best thing I ever did was get out of that toxic outfit. I was only there 12 years, not 25 like you!

However, I have NEVER been so well respected, valued, and TRUSTED as I am now. My ONLY regret is that I never exited stage left from QF a lot earlier.:ok:

[waren9]

How does this table allow for different levels of outsourcing?

e.g. One airline might outsource a lot of low skilled, low paid type work thereby artificially raising it's cost per employee. Another airline might outsource more of the higher value employees (with say, contract pilots) and thereby artificially lowering its cost per employee by comparison.

Curious that BA shows cheaper than AirNZ. Does BA outsource more cleaning than AirNZ?

[Nassensteins Monster]

No doubt our wage costs place us at a disadvantage.

So do a few poor decisions by management. Probably the major one is the failure to acquire B777s. AJ said in the Senate hearings that it was the wrong aircraft for Qantas, yet it was fine for Air NZ - an airline in a similar geographical and operational situation as QF - not to mention all of our competitors. If fuel costs comprise 25% of total operating costs, how much of that 25% is burned by the B744, the mainstay of the QF Int fleet? If B777s burn 30% less fuel than a B744 for a similar payload & range then even after costs of B744 disposal and B777 acquisition (lease/buy plus accounting & financial jiggery-pokery) QF profit margin would be a couple of percentage points higher. That's a considerable increase when we're operating on about 5% or less margin. It means a 40% increase in profit.

The crux of the issue however is Federal and State government policy failure over DECADES. A failure to support one of the most important transport sectors to a First-World country that is vast, sparsely populated and with a highly urbanised population. This is where AJ should be putting the public punches on. Shame the bastards. Expose the short-sighted mealy-mouthed weasels for their myopia and cowardice.
1. No second airport in the Sydney Basin
2. Privatise the only international airport in the Sydney Basin, sit back and watch as airport costs triple.
3. Failure to match our competitors home governments accelerated depreciation schedules for the aviation industry, which would allow the industry - from GA to RPT - to upgrade to more fuel efficient aircraft more cheaply and faster.
4. Failure to implement the resource rent tax as recommended by the Henry Review, ie tax the resource super profits and use the proceeds to propel the non-mining economy by cutting company tax.
5. Introduce a carbon tax 7 years before the rest of the world.
6. Open skies policy instead of reciprocal rights policy.
7. Changes to OHS and industrial laws that unwind 25 years of reform and cripple productivity.

Imagine a CEO that said "We value the input of our highly professional and loyal staff. They are world class, so we're happy to pay world class wages. But the Governments of this country must come to the party if they truly value the Aviation sector!"

Imagine a government that listened, thought strategically, made long term decisions and implemented the decisions competently.

Dream on.

[blow.n.gasket]

Geoff's got it in one, the capt's club membership that is.


Geoffrey Thomas, chief editor of Air Transport World, said Qantas had to tackle the industrial action head-on. Failure would have threatened the airline with collapse. "Corporate bookings were down 40 per cent, which is a totally intolerable situation. They were being slow-baked." He said the industrial action by engineers and baggage handlers and threats by pilots meant the airline had to go with the "nuclear" option of a lockout. "The airline was facing losses of $85 million and it was only a matter of time before it was torn apart." He said the union strategy was to make the dispute so expensive the airline would buckle.
Thomas said relative costs made it difficult to compete. While a captain of a US airliner with 21 years' experience was paid on average $155,000, Qantas was paying its top long-haul pilots closer to $380,000 with co-pilots on $280,000 and first-officers $180,000. Wages for US airline captains had fallen by an average 40 per cent over the past 10 years, largely because so many airlines went into Chapter 11 bankruptcy and renegotiated their pay deals. Thomas said Qantas pilots were also better paid than Jetstar pilots: 40 per cent more for 26 per cent less flying.
Thomas said with so many international airlines flying to Australia, Qantas was struggling to compete with a cost base of 20 per cent higher. One of the latest airlines flying to Australia, China Southern, was offering a return business-class Sydney to Paris ticket for $4500 (Qantas charges twice that).
"The dynamics of air travel and marketing have changed dramatically over the past 20 years but the unions have not caught up. There was a time when Qantas could demand a premium based on its safety record but all airlines are relatively safe and it has fallen away as a concern among passengers who are now far more price conscious. Engineers and pilots have to stop living in the 1960s and 1970s," he said. :yuk:

[Tankengine]

Interesting that he mentions China Southern considering the package for DEC there is more than at Qantas for A330 Captains.:rolleyes:

[Howard Hughes]

with co-pilots on $280,000 and first-officers $180,000.
Gives the F/O's something to aspire to, I mean if they work hard, one day they could all be 'co-pilots'!;)

[Angle of Attack]

And China Southern are going to offer a heap more Aussie bases mainly on A330 over the next few years, 200k after tax for Captains and rumour is F/O basings will be offered later this year.(around 110k net), Forget GT he is a knob, this is the QF market being carved up by foreign airlines paying more than QF does so forget the crying poor Irish fool get in there and take the money while QF flounders!

[DrPepz]

Would this chart make some sense?

Qantas Personnel Costs - Bloomberg (http://www.bloomberg.com/chart/idRl40czjL6o)

Employee expenses as a percentage of sales:

QF: 28.5%
CX: 15.4%
SQ: 14%

[blow.n.gasket]

Thanx Dr Pepz,
Just goes to show, I believe , the cost impost unskilled labour in Australia
causes to Australian Business' bottom line.
One more point worth mentioning in all this is, is that EBA's have been going on for some time now at Qantas.
Before an EBA can be voted on by emploees, Qantas Management have to approve said contract.
Does this mean that all of Qantas' present uncompetitive woes can be sheeted home fairly and squarely at piss poor Qantas management negotiating skills regarding EBA's??? :eek:

[Slasher]

Going back to your first post Pepz its a nice graph but a bit
misleading by comparing it to USD. A US dollar for example
goes a lot further in Malaysia (MAS) say as compared to the
UK and Oz, and as you say above the personal tax on gross
income is far less than both.

[DrPepz]

Yes Slasher you right. 1 USD goes much further in KL than in Sydney, there's absolutely no doubt about that.

But from a company perspective, they will only care how much it costs to pay an employee. A Malaysian employee would be willing to be paid less than a QF employee because it is cheaper to live there. Or a HK employee would be willing to be paid less than a Sydney employee for the same job, because the tax rate is lower. (An income of SGD150,000 leaves me with much more post tax than an income of A$150,000 even though the SGD is 25% cheaper)

But ultimately, companies look at the overall cost for hiring a worker, and they don't care that it costs 1 Ringgit for a can of Coke in KL as opposed to A$1 in Australia.