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Qantas ready to demobilise-2500 staff

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Qantas ready to demobilise-2500 staff

Old 18th Feb 2003, 15:19
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Qantas ready to demobilise-2500 staff

Wed "Sydney Morning Herald" 19/2/03

Qantas ready to demobilise
By Elizabeth Knight
February 19 2003

Qantas has devised a contingency plan should Iraq be invaded that will result in the airline removing up to 2500 staff from its workforce in order to minimise the impact on profits.

There has already been some movement in this direction with anecdotal reports that labour slimming has begun. Even the threat of war is beginning to affect forward international sales for Qantas, as it has for other international airlines.

Word is that the model Qantas has engineered puts the fall in passenger volumes at between 15 and 20 per cent should the shooting start.

Given the fact that Qantas - like all other airlines - has a high fixed cost base the impact on profit will be far greater.

To get some idea of these major events, Qantas lost $15 million before interest and tax from its international operation in the six months that included September 11, 2001. In the same period a year earlier it made $285.9 million.

It was able to redirect its staff and planes to domestic routes because September 11 coincided with the collapse of Ansett, so overall profits were still ahead. There will no such buffer this time if the war goes ahead.

Qantas will pull out all stops to cut costs to minimise the impact of the fall-off in volumes. Clearly, staff reductions are the easiest target.

After September 11 volumes on many of the international routes were back to normal within six months, but the number of US flights per week is still marginally down.

The airline experienced a similar reduction in volumes after the previous Gulf War. But with both September 11 and the first Gulf War, Australia was seen as something of a safe haven.

While air travel fell all over the world, Australia was viewed as removed from the conflict.

Thanks to PM John Howard's outspoken support of US aggression this cannot be said of this potential conflict. We have already been identified as a terrorist target - which does not help public confidence in the safety of our national airline.

How much Qantas chief executive Geoff Dixon can drag out of costs will determine how badly the airline will be damaged by war.

There are suggestions that $120 million to $150 million can be saved from labour costs.

But others say this is overly optimistic.

It all depends on whether this is a short, sharp war or a protracted engagement.

Qantas will try to extract some non-cash savings by asking staff across the board to take accumulated leave.

It won't actually save it any cash but will reduce the liability on its balance sheet. To get the real savings it will have to make real redundancies - although this move will result in a large, one-off cost.

Meanwhile, analysts predict Qantas will report a bumper profit on Thursday for the half to December of $490 million, pre-tax. This should provide it with the fat it needs to see it through a lean six months.

How long it takes to rebuild profit to the levels it has experienced over the December six months is mostly a factor of the length of the war - if, indeed, there is going to be a war.

The extent to which Qantas can rely on its buoyant domestic operations to offset a fall in international volumes is dependent on whether Singapore Airlines makes good its threats to start up a domestic service.

Suggestions that Singapore will tie up with Virgin are said to be incorrect. Clearly, if Singapore has Australian domestic plans they will not be put into effect until the issue of war is resolved.

The near domestic monopoly - and the total monopoly in the business market - has been a boon for Qantas. And Dixon has worked it masterfully.

But it has resulted in serious problems for its service levels. When its only competition is a discount airline it has been able to wade through complaints that extend from the lack of timely departures to a passenger being thrown a box containing a half frozen muffin as a refreshment.


Pic: Qantaslink 717-200 VH-VQE airbourne from rwy 01 BNE.
Photo: Wirraway (Ian Sharp)

Last edited by Wirraway; 18th Feb 2003 at 23:27.
Wirraway is offline  
Old 18th Feb 2003, 23:19
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nice photo of the '71 wirraway, should be VQE but, VOE is a DJ 737-800...makes it hard as from a distance the Q looks like an O...
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Old 19th Feb 2003, 01:24
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If Qantas do this then I hope that the unions close them down to the tune of $150 million, or even better $500 million. Perhaps then the d*ckhead management will realise that people are more important that a faceless company. Hopefully the evil b*stards who thought up this idea will get the flick from management permanently. Why is it that aviation managers are the most useless, incompetent loosers on the face of the earth?

Now for how I REALLY feel......
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Old 19th Feb 2003, 02:11
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Geddy, what a great idea - hopefully the unions can do more damage than $500m and more people can lose their jobs. Preparing a contingency plan in the worst case of a 20% drop in traffic, yep, that's pretty incompetent.
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Old 19th Feb 2003, 02:54
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And are any Second Officers in this group?
compressor stall is online now  
Old 19th Feb 2003, 02:59
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Anyone want to bet that 2500 jobs will suddenly appear at Australian Airlines??
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Old 19th Feb 2003, 04:32
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Compressor Stall - I think you'll probably find that aircrew as a whole make up a very small percentage outlay of Qantas' budget; As such, I'd hardly envisage that Qantas has brand new hire Second Officers in line to be made redundant should there be a 20% drop in traffic ...

It's probably also relatively difficult to 'outsource' the role of a S/O, compared with a function such as catering, cleaning, etc. Besides, aircrew have already made significant contributions towards Qantas very healthy half year profit, by way of wage freezes etc, so I'd suggest that management may be looking elsewhere to minimise costs.

I won't stand here & defend Qantas management practices by any means, BUT... you've got to admit - the bottom line does look pretty healthy at the moment...

Just my thoughts.
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Old 19th Feb 2003, 12:07
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Considering that I've been called a few times this roster to sell me a standby in the top third of the 767 F/O list, I'd be surprised if we were 'over the top' with crew.

This strikes me as a 'keep them honest' type ploy by the company. We are all in EBA negotiations and so this is the shot across the bow.

Interesting times. Interesting that the southern base for AO was supposed to be up and going 'early in the new year' yet nothing heard about it yet!
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Old 19th Feb 2003, 14:40
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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.
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Old 19th Feb 2003, 23:23
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Qantas profit doubles, cuts loom
February 20, 2003 11:22 AEDT

THE departure of rivals from Qantas's domestic and international route has propelled earnings for Australia's biggest airline, which today reported a more than doubling of its first half profit, but 1500 staff cuts loom pending global tensions and slump in demand.

Qantas Airways today reported a net profit of $352.5 million up 129.6 per cent.

Analysts were expecting a net profit of between $300-$350 million.

The result was well up from the previous half's $153.5 million, after its international operation slumped into the red because of the post September 11 drop in global travel.

But events like the October 2002 Bali bombing and potential upcoming conflict in Iraq continue to subdue the outlook for passenger growth.

Qantas chief executive officer Geoff Dixon said the airline had taken steps in recent weeks to meet the changing market and economic conditions.

Assuming no further deterioration in demand, he said, the airline was still on track to achieve its full year profit target.

However, he said in recent weeks the recovery seen in international markets and the growth in domestic flying had come under pressure from the tensions surrounding Iraq and the very public threat of terrorism.

"Forward bookings for the next 16 weeks have slowed considerably in some markets, including Japan, Europe and the United Kingdom. All carriers appear to be affected," he said.

Unions yesterday were outraged at reported plans by Qantas to sack 2500 staff - 10 per cent of its workforce - if war breaks out in Iraq.

They accused the airline of leaking the plan to boost its share price and give it the upper hand in pay negotiations.

An angry Australian Services Union assistant national secretary Linda White, representing Qantas ground staff said there was "no justification" axing so many jobs on any scenario.

Mr Dixon said Qantas's contingency plans in case of a downturn included the use of accumulated annual and long service leave entitlements to reduce staffing between now and June 30, 2003, by the equivalent of 1500 full time employees.

As well reductions in planned flying from March in both the domestic and international operations and a freeze on discretionary expenditure were on the cards. "However, if tensions continue around Iraq and terrorism, bookings could further deteriorate," he said.

"In such an environment, our profit target would certainly become more difficult to achieve."

He said Qantas, which is hoping for regulatory approval to secure a stake in Air New Zealand, was well positioned to maximise its opportunities when the global travel market recovered.

Qantas chairman Margaret Jackson described today's profit result as pleasing, particularly given challenges and difficulties in the aviation industry.

"The world's airlines lost about $US18 billion in the 2001 calendar year," Ms Jackson said. "Losses are expected to total $US12 billion in 2002.

"In the United States, two of the largest carriers - United Airlines and US Airways - have filed for bankruptcy protection. Many other carriers in the United States, Europe and South America continue to report losses, shed staff and retire aircraft.

"The performance of Qantas in this environment is a tribute to the efforts of staff and management." Mr Dixon said the result had been achieved in circumstances where domestic air fares were at historic lows, with the Bureau of Transport and Regional Economics revealing discount domestic fares were 23 per cent cheaper than three years ago.

The airline continues to benefit from the collapse of rival Ansett in September 2001, which then held around 42 per cent of the Australian market, although Virgin Blue has now taken between 20-25 per cent of the domestic market.

Qantas had grown some 50 per cent domestically.

Mr Dixon said that by the end of this financial year, Qantas will have invested approximately $6 billion on new aircraft, inflight entertainment, seating and other product initiatives since the collapse of Ansett.

Mr Dixon said while all areas of the business had contributed to the result, the improvement of the international operations stood out.

International operations earnings before interest and tax (EBIT) totalled $263.9 million compared to an EBIT loss of $15.5 million previously.

Revenue Passenger Kilometres (RPKs) for international operations increased by 2.5 per cent on reduced capacity of 3.3 per cent, leading to an improvement in load factors of 4.6 percentage points.

Yield, excluding the impact of unfavourable movements in foreign exchange, increased by 4.3 per cent with nearly all route groups providing a positive return.

Domestic airline operations, including QantasLink, contributed $197.9 million in EBIT, 1.7 per cent less than the previous corresponding period.

Qantas Holidays increased EBIT by 14.2 per cent to $19.3 million, primarily due to growth in the domestic market. The outbound market was detrimentally affected by the Bali bombings and travel warnings to destinations including Thailand and Malaysia.

QantasLink improved its EBIT result by 78.3 per cent, to $37.8 million.

Australian Airlines, which commenced operations in late October 2002, achieved an underlying operational EBIT of $4.4 million for the period to 31 December 2002.

The net impact of favourable foreign exchange movements was a $32.5 million benefit to profit.

The result comes as Qantas flight attendants announced strike action next week over the airline's sluggish response to their claim for a pay increase of 7 per cent as a reward for productivity gains made by cabin crews.

The Flight Attendants' Association of Australia said its 4000 members had accepted a wage freeze imposed on them by management as well as a reduction in cabin crew numbers since February 2002, estimated to save more than $40 million a year.

Qantas has maintained its interim dividend at a fully franked eight cents per share.

Qantas shares were down 30c at $3.50 at 11:22 AEDT
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Old 20th Feb 2003, 01:02
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Reading what Dixon has to say it doesn't look like anyone will be losing their jobs as long as 1500 take enough accumulated leave! Forget pilots - it seems he's more concerned about the rumblings of the FAAA...

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Old 20th Feb 2003, 01:21
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Thurs "West Australian"

Qantas prepares for war with cuts
By Geoffrey Thomas

QANTAS will lay off up to 2500 staff as part of a wartime contingency plan that the airline is expected to outline when it unveils its interim profit today.

The company refused to comment on reports of the cull, which would involve paring its workforce by 38 per cent to deal with the travel downturn that would be caused by a war.

But a Qantas spokesman said: "We have contingency plans for the inevitable downturn in travel that would follow a war in Iraq.

"These plans take in a variety of scenarios and will depend on the circumstances at the time."

The airline expects passenger volumes to slump 20 per cent if the war is protracted but analysts say this would be offset by the expected collapse of United Airlines, which operates from Los Angeles and San Francisco to Sydney and Melbourne.

US analysts claim United will almost certainly collapse if the Iraqi war starts in two weeks, as expected.

United has already withdrawn from the Auckland-Los Angeles route, leading to Air New Zealand shifting all its capacity from the Sydney-Los Angeles routes and redeploying to cover United's withdrawal.

The total effect of United's collapse would be an additional five flights a day to be operated to the US by Qantas.

Analysts in Asia say Cathay Pacific's contingency plans call for a 20 per cent cut in flights while Singapore Airlines plans to park a "significant number" of its fleet.

Qantas is already experiencing some slackness in forward bookings with speculation of the war mounting.

To provide some perspective on its assessment, the airline said it would have needed to lay off 8500 staff after September 11, if it had not been for the collapse of Ansett in the same week. In the six months to December 31, 2001, Qantas lost $15 million before interest and tax from its international operation, compared with $285.9 million profit in the same period a year earlier.

An Iraqi war will have the double impact of an increased threat of terrorism, which is sure to hurt travel.

Qantas may outline a series of options today which will include staff taking leave and leave without pay.

The airline is also understood to have plans to rapidly switch its fleet to destinations well away from the conflict area.

A positive for the airline is that travel within Asia has been mainly unaffected by September 11, but this is also an area where Qantas is at a significant cost disadvantage against Asia-based airlines.

It is likely that Qantas will accelerate its expansion plans for its lower cost Australian Airlines operation with flights starting from other cities, other than Cairns.

The airline had indicated that Perth-Bali flights with 767s were an option for Australian Airlines.

2003 West Australian Newspapers Limited
All Rights Reserved.
Wirraway is offline  
Old 21st Feb 2003, 10:19
  #13 (permalink)  
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and what about the windfall in trans pacific fiights?

Has this not effected profits!

Sorry have seen this way too many times ,a well tried and tested management technique (works in Europe too!!) To quell any employees ambitions for a healthy pay rise in light of recent bumper profits is to tell them hey forget the pay rise just think yourself lucky you have a job!! Works 99percent of the time leave the cream for the pigs at the trough.

Too may times too many times!!
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Old 24th Feb 2003, 02:37
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Dicko could start by sacking all those bag snatchers who delay most flights, and replace them with people who appreciate earning good money for their unskilled labour.

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