American Airlines CEO: Qantas not a "premium" airline

[oicur12.again]

Of course Jetstar benefits from being within the QF group, I don’t recall suggesting that this was not the case. However, Jetstar, unlike its US cousins mentioned above, is kept considerably more at arms length and as a result does not see the cost migration from QF to the same degree as happened at Song, for example.

“Labour costs, with respect to pilots wages are a very very small part of the big picture.”

Labor costs are one of the few costs an airline can control and the largest expense incurred by an airline. Pilot costs are one of the most significant. Labor costs are sometimes the only way in which an airline can differentiate itself from another airline competing for a finite inflow of capital.

The business will NOT support the difference in labor costs between Jetstar and QF if it does not need to. The fact that Jetstar can attract crew to fill its cockpits on Jetstar terms of employment signals acceptance of a change in the expectation of the labor market.

Cutting pilot salaries alone will probably not change the course of QF’s future a great deal, but if a business can achieve the same result on lower wages, then why wouldn’t it?

Note: I am not a manager. I do not work for Qantas or Jetstar and never will. I love money and the toys it brings. I wish every pilot at QF the very best. But I am aware that my labor is being sold on a changing market that is becoming increasingly more competitive and it is important to balance my greed against the price an airline is willing to pay for my services.

[Mstr Caution]

Jetstar is a separate business from QF. Overheads and labor costs are totally different to QF.

Yes, the labour costs are totally different to Qantas.

Take the MOU for transfer of pilots from Qantas to Jetstar for example.

A Qantas pilot transfers to Jetstar for a fixed term of three years, whilst on that leave of absence that pilots "accumulation" of years of service for the purpose of long service leave is "frozen" at Qantas.

After the three years fixed term, if the pilot returns to Qantas the 3 years is credited towards the length of service for long service leave at Qantas.

Net result, no financial cost to Jetstar for long service leave obligations.

No wonder the J* business model is an amazing success.

MC

[Zapatas Blood]

there is a huge difference in the way the job is done at qf compared to newer carriers - salary aside. the unions prevent so much efficient operation at qf. remember when the engineers at qf were still doing multiman pushbacks while jq 717' were using the new single person remote tug. this happens throughout an airline like qf - its no wonder a new airline is started on a clean sheet of paper. job building is the bane of old world airlines.

[Mstr Caution]

Zapatas.

The I infrastructure let's the mainline brand down.

One example is the amount of NIGS around the network that don't work (thank airports for that)

Add wide body aircraft & non standard wing tip clearances requiring a marshaller & two wing tip walkers.

Rather than fix or replace the NIGS the company will continually blame it's labour as inefficient.

[7378FE]

AA have operated to Aust on 2 previous occasions. In the 70's with a B707

Quite correct

[neville_nobody]

However, Jetstar, unlike its US cousins mentioned above, is kept considerably more at arms length and as a result does not see the cost migration from QF to the same degree as happened at Song, for example.

Song wouldn't have had that problem if they got Jetstar accounts to do their bookkeeping. If Jetstar was accounted accurately and correctly then it would have had the EXACT same problem as SONG, TED and every other airline that has started a low cost model. It's just that Jetstar got QF to pickup the tab on just about everything and then run around saying they're a independent airline.

Remember when it's good PR Jetstar's an independent airline, when Jetstar break down/screwup/nearly kill everyone it's a 'QANTAS group airline'.

[teresa green]

Just go onto The Australians website today and read the article by Peter Beattie. It makes our airlines look positively regal! AA indeed, you would have to drag me kicking and screaming onto most of the airlines in the USA. I worked there for nine months after THAT year, jeeeeesus.

[speeeedy]

Labor costs are one of the few costs an airline can control and the largest expense incurred by an airline.

This is true, but it is still only about 25% of total expenditure which for a often highly skilled labour intensive industry is not too bad.

Pilot costs are one of the most significant.

Not really, Pilot costs in QF make up about 15% of labour costs whilst making up about 9% of staff, not an unreasonable differential given the job responsibilities.

What it really boils down to is that even if you worked on the best case scenario for the company, lets say they can offshore and outsource and somehow reduce pilots wages/increase productivity to realise a 25% saving, it would actually mean 25% of 15% of 25% which equals a massive (not) saving of 0.9%.

So chuck away 90 years of piloting experience and destroy the publics faith in a fairly fundamental part of the Qantas brand by offshoring and lowering standards for what: 0.9%.

Has anyone on the board actually looked at the numbers? The very real risk of destroying the reputation of your most highly respected employees is that you will destroy or at least seriously damage your brand at the same time, lowering standards will also increase the risks of very expensive accidents and incidents, this has been proven time and time again.

Look at any crash comic over the last 10 years and the steady increase (as a % of accidents) of perfectly serviceable planes with all the EGPWS, and GPS and Moving Maps and Glass Cockpits etc just crashing for no real reason is starting to get quite obvious to all but the bean counters.

Planes taking of and crashing due to disorientation, Insanely unstable approaches continued ending in tragedies, Go Arounds attempted after reverse thrust pulled, Stalls and stickshakers are regular, some resulting in massive prangs other saved by the grace of god (but not the pilot), F%$Ked up go arounds, the list just goes on and on and on.

I'm not talking about complicated swiss cheese accidents that might involve some other factors (there but for the grace of god go I type stuff), I'm talking about basic GA type accidents in jets.

FOR 0.9%

They need their head read.

They need to be stopped!

[breakfastburrito]

Excellent post speedy:

I'm talking about basic GA type accidents in jets

This is the crux of the issue.
Loss of control has overtaken CFIT as the number one accident cause IIRC & the accident rate has not declined over the last 10 years. Fundamental stick & rudder manipulative skills are now beyond an increasing minority of crews in RPT jet operations. The push by operators to lower the bar will only see this increase over time, and with it the a corresponding increase in these type of accidents.

[AnQrKa]

Your whole argument mate revolves around this comment:

lets say they can offshore and outsource and somehow reduce pilots wages

What ability does Qantas presently have that would let them offshore pilot jobs. They cant employ cheap ass workers from asia to fly Australian registered planes? Only oz licenced pilots can fly oz registered planes so why the threat of these apparently highly dangerous imports that keep crashing every week. It aint legal.

[SOPS]

Just being a devils advocate...why would the planed have to be registered in Oz?

[breakfastburrito]

They cant employ cheap ass workers from asia to fly Australian registered planes?

That's precisely the devious twist. They are off-shoring to somewhere there is no suitable labour. They are moving the job and the worker. Australian pilots will still be flying VH register aircraft, but employed in another country. This is probably more about saving the PAYE income tax than anything else. Moving to a more "friendly" IR & regulatory enviroment is icing on the cake. This is a new twist on labour arbitrage, the concept of moving both the job and the worker.

They need Australians so there is no pesky problems with work visa's or licences, you are absolutely correct. They are then free to employ the lowest experienced AU crew they can, or already have in debt bondage through the cadet system.

[freegeek]

I had to LOL when I read that, I flew Brussels-San-Francisco-Las-Vegas-Chicago-Brussels just 2 weeks ago with AA and they should rename it ghetto airlines. They are light years behind compared to Air France or BA and I don't even want to compare with others (SA, Emirates). The seats were full with stains, it was like someone vomitted all over the interior.

[The Professor]

Speedy,

“it would actually mean 25% of 15% of 25% which equals a massive (not) saving of 0.9%.”

Wow, interesting math’s. But for the sake of argument, lets use your 0.9% cost savings. Are you aware that this would be an annual saving to the business of about 40m. Do you think this is insignificant? What does 40m per annum more buy QF that can’t be provided by a cockpit crew on market rates?

But lets assume that the sky caves in and QF achieves the labor cost savings they are seeking by basing crews “offshore”.

As pointed out by BB, these crews must be Australian’s holding Australian licenses flying VH registered aircraft.

So why does this constitute “chucking away 90 years of piloting experience”. Why do you assume that the pilots employed in these bases wont bring with them “90 years of experience” too. Just because they don’t wear a QF uniform doesn’t mean they are new to the game.

“lowering standards will also increase the risks of very expensive accidents and incidents….”

Again, what makes you think standards will be lower in these bases? All Australian licensed pilot’s work to a standard defined by the Australian regulator. If this does not apply to “offshored” crew then you have a regulation issue. I suggest you lobby your local member to correct this.

“Just being a devils advocate...why would the planed have to be registered in Oz?”

Does QF have the facility on their AOC for non oz registered aircraft?

[speeeedy]

Not a professor of maths obviously.

My main point is that a 25% saving in pilot costs is totally ridiculous, in order to achieve that you would have a fight which would literally rip the airline apart, so the savings would be eclipsed by the Billions of dollars worth of brand damage and many millions in lost revenue. If every 1% change in Load Factor is about $200 Million can you be sure that a fight with your pilots is not going to turn away a few %? Very expensive, risky and stupid, particularly if they only get marginal savings which is much more likely then 25% don't you think?

Why do they bother? This is not a fight worth having, I'm certain of it.

Regarding offshoring, if Qantas sets up a new airline in Asia it will have its own AOC in the country where it is based, which means the aircraft will be registered there which means that the pilots will be licensed and based there. What is the point otherwise?

What Asian country is going to let a new airline set up but be licensed controlled and registered in a foreign jurisdiction?

Qantasia will start doing Asian flying but soon after they will "Compete for capital" with mainline and we all know what that means, all new equipment to Asia and soon they fly into Australia and take over almost all international flying, just like Jetconnect did on the tasman.

Is Jetconnect on an Aussie AOC? Are the planes registered in OZ? Are the pilots Aussie? No, No and Not many.

But you ask why would the standards be lower? Do you not get it?

This airline will be no more attractive then any dodgy asian airline looking for cheap pilots. No Australian base means they would not be a magnet for Aussie pilots, in fact the reverse, if they do this they will be seen as the Tighta#$e Pr&^ks that they are. Anyone with any clue will be going to Emirates or Cathay over Qantasia.

But the most important thing here is that Qantasia will be a disaster because it will be seen for what it is, a cynical offshoring of Qantas. It will have no brand credibility in Asia and, worse, it will destroy the brand in Australia which means that the cash cow domestic business is stuffed.

Does the board work for Virgin Australia?

[The Professor]

“…it will have its own AOC in the country where it is based, which means the aircraft will be registered there which means that the pilots will be licensed and based there.”

Correct. It may even carry the Qantas brand but it will not be Qantas. It will be a locally based business. I assume you are an employee of Qantas Airways Limited? An employee of Qantas has no ownership over the Qantas BRAND any more than the UAW have ownership of the GM brand in China.

“Is Jetconnect on an Aussie AOC? Are the planes registered in OZ? Are the pilots Aussie?”

No, because Jetconnect is a New Zealand based company carrying the Qantas brand. It does not belong to the employees of Qantas Airways Limited.

My comments regarding the off shoring of Australian licensed crews operating VH registered aircraft refers only to Qantas Airways Limited. The fear mongering perpetuated by employees such as you that QAL can employ cheap Asian pilots is totally unsubstantiated and cannot occur under current legislation.

But of course an Asian based business would not have oversight provided by the Australian regulator much like Asian based airlines presently operating into Australia don’t. The decline in international market share that Qantas has suffered indicates that the customers are comfortable with this.

“This airline will be no more attractive then any dodgy asian airline looking for cheap pilots.”

What an offensive and ignorant statement. Are all airlines based in Asia “dodgy”? Can you list them all?

“No Australian base means they would not be a magnet for Aussie pilots”

Dear oh heavens. They surely wont survive then.

[Tankengine]

Offensive? - perhaps
Ignorant? - probably not
Dodgy? - you bet!
How many jet hull losses in Asia last 20 years?

Wait for the adverts to come out, I bet they don't have 10000hrs+ for command and 3000-5000+ for F/O.

[speeeedy]

Not a professor of comprehension either.

On one hand you say:

... these crews must be Australian’s holding Australian licenses flying VH registered aircraft.

and

... what makes you think standards will be lower in these bases? All Australian licensed pilot’s work to a standard defined by the Australian regulator. If this does not apply to “offshored” crew then you have a regulation issue. I suggest you lobby your local member to correct this.

Inferring that Aussies have nothing to fear from the offshoring of Qantas. Which is obviously a pretty pathetic understanding of the whole concept of offshoring particularly as demonstrated by the QF groups form with Jetconnect and Jetstar Asia.

In your next post you agree that the airline would NOT be Australian totally contradicting your previous post:

Correct. It may even carry the Qantas brand but it will not be Qantas. It will be a locally based business.

After previously displaying an alarming inability to use a calculator, you have now demonstrated a contradictory position and a lack of even a basic understanding on Qantas offshoring. But now it is time for you to fain offence.

What an offensive and ignorant statement. Are all airlines based in Asia “dodgy”? Can you list them all?

No, they are not, and I did not say that. But there ARE dodgy airlines in Asia and my simple point (simple for some) is that Qantasia will be no more attractive to potential pilot employees then any of these airlines.

But you have no comment on the basic premise and most important point of my post, this is what the board must start thinking seriously about:

But the most important thing here is that Qantasia will be a disaster because it will be seen for what it is, a cynical offshoring of Qantas. It will have no brand credibility in Asia and, worse, it will destroy the brand in Australia which means that the cash cow domestic business is stuffed.

[The Professor]

Speedy, you don’t seem to understand that we are debating two possible scenarios. Your argument skips between the two because you have are blinkered by fear mongering.

QAL, the airline you probably work for, can base crews in Singapore if they chose. They can probably even offer different employment conditions. But they must be Australian license holders. They must be employable in Australia. QAL CANNOT operate their current mainline fleet crewed by Vietnamese licensed Cambodians based in Singapore. If you believe this will occur then I have a big red bridge in San Francisco I want to sell you.

And so again I ask, in the above example, what makes you think the standards in Singapore will be lower than the standards in Sydney. QAL flight training standards will still apply and oversight will still be provided by the Australian regulator. CX could be used as a comparison. They may employ Australians to fly aircraft based in Australia as a cost saving measure but they can’t escape the cutting edge oversight provided by Hong Kong CAD. They still work for CX and they must qualify for a Hong Kong work visa.

Now, lets shift gears and talk about QF starting up a separate airline in Asia under the QF brand. This will most likely occur and was almost ready to go ahead in the form of Adam Air in Indonesia. It will be a separate business, with ownership determined by local law according to which country it is located in. Unlike the first example, QF will be free to employ anyone they chose to fly these aircraft on whatever terms the market dictates. This is the scenario that I suspect you “fear” because you will not be involved.

With both examples I have outlined, your industrial action is pointless. QAL cannot bypass you and employ foreign crew to fly the aircraft you presently operate. This cant happen. Conversely, if QF launch another QF branded but foreign-based business, you have no legal right to demand employment by this airline and any such claim will be rapidly dismissed in court. The employees of QF do not own the brand. You have a right to enforce the terms of your employment with QAL but nothing more.

“But the most important thing here is that Qantasia will be a disaster because it will be seen for what it is, a cynical offshoring of Qantas. It will have no brand credibility in Asia and, worse, it will destroy the brand in Australia which means that the cash cow domestic business is stuffed.”

This may be true but it doesn’t relate in anyway to your proposed industrial action. The QF board isn’t really interested in salaried workers providing their opinion as to how successful the airlines long-term strategy will be.

['holic]

This will most likely occur and was almost ready to go ahead in the form of Adam Air in Indonesia. It will be a separate business, with ownership determined by local law according to which country it is located in.

Let me give you a quick tip for beginners. If you are trying to win an argument on Pprune, any argument at all, don't use Adam Air as an example.

This may be true but it doesn’t relate in anyway to your proposed industrial action. The QF board isn’t really interested in salaried workers providing their opinion as to how successful the airlines long-term strategy will be.

Really? What about the people who don't care about a payrise? What about the people that don't care about staff travel? I would suggest to you that the reason the PIA vote returned 94% in favour is because people are absolutely fed up with the direction management is taking this company, regardless of relatively minor issues like pay and conditions. Do you really think throwing them couple of free trips a year will change their minds? Not much point if they're going to be out of job in a few years. The only thing that will get the workforce back on side is seeing AJ and the board gone. So the board should be interested in their workers' opinions, if only to preserve their own arses.