Fewer flights and frequent rises ahead
Adele Ferguson
June 09, 2008

AUSTRALIANS will face increased airfares and fewer flights from Qantas and Virgin Blue as the airlines either park, sell or re-route up to 10 per cent of their domestic aircraft in a bid to hold profit margins as oil prices continue to blow out.

Both airlines are hurrying to introduce new strategic programs that include restructuring their frequent flyer business and reviewing their dividend policy.

As early as tomorrow, Virgin Blue is expected to outline a series of strategic measures to alleviate pressure on earnings from fuel price rises, which jumped another 8 per cent on Friday night to a record $US139 a barrel.

This is expected to include cancelling and/or deferring some of the seven 777s Virgin Blue has on order, moving a minimum of three on to the US route and reducing domestic capacity by up to 10 per cent. It is also believed to be considering selling a stake in its loss-making frequent flyer business, Velocity.

Qantas boss Geoff Dixon announced last week that the airline had cut 5-6 per cent of its total fleet, with a report by one of Merrill Lynch's top analysts, Kevin O'Connor, estimating the cuts were equivalent to a 10 per cent reduction in capacity on the domestic market and a much smaller reduction in its international fleet.

If both airlines reduce domestic capacity by a combined 20 per cent, it will automatically lift airfares, load factors and yields.

This is not the first time customers have copped fare increases. On April 28, Qantas announced it would increase domestic and international fares by 3.5 per cent and 3 per cent. Then on May 22 it announced a further 3 per cent rise in domestic fares and 4 per cent rise in international fares.

This is happening against a backdrop of flight cancellations and strikes caused by the seemingly endless industrial relations disputes between the unions and airline over pay.

What is fascinating about the industrial relations disputes is that its toxicity is believed to have spread inside the company. The reason is simple: he Australian understands that one of the key architects of Qantas's industrial relations strategy is an outsider, former ACTU official Ian Oldmeadow, who is renowned in union circles for being confrontational.

The Australian understands that Qantas pays Oldmeadow Consulting $3 million a year to help run its industrial relations strategy, including attending important meetings with key union figures.

During calm times it makes the job of a human resources manager easy to outsource key aspects of industrial relations, but when things turn sour, as they have now, it highlights the need for internal control of the policy.

It would no doubt make the job of Qantas's human resources manager, Kevin Brown, all the harder.

Dixon confirmed that Oldmeadow had worked for many years with Qantas's internal industrial relations team on a range of issues, but said: "Any allegation of friction in the company is mischief-making, which often raises its head when we get into disagreements."

While it is taking a significant hit from the fuel prices, as well as industrial disputes, the national carrier still stands to make a $1.5 billion profit this financial year. The big question mark is over the 2009 and 2010 profits if oil prices continue to rise and strikes intensify. But the high fuel costs and the battle with unions over pay rises are only two of the challenges facing Dixon, who is due to retire next June. Qantas is also facing big capital expenditure programs to replace some of its fleet. About 25 per cent of the fleet (by seat capacity) is of 1990s vintage or older. Old planes are costly to run and inefficient.

There are estimations that Qantas's capex over the next three years will average $3.5 billion a year, which would result in a negative free cash flow over that period. This means that if it wants to keep paying a dividend, it will have to borrow the money to fund it.

Indeed, Merrill Lynch estimates that dividends will be cut from an estimated 25c in 2009 to 9c a share, and from 30c a share in 2010 to 17.5c a share.

Against a tumultuous backdrop, Qantas has confirmed it is on track to launch its "any seat" redemption option on frequent flyer points on July 1. The board will make a decision on its ownership structure in August and later in the year it is expected to outline those plans to the market.

Any seat redemption will effectively allow members to book any seat using frequent flyer points. It will take far more points than the current system but will allow members to book a seat in the same manner as a customer who pays cash.

In an accounting sense, this spending of points will be revenue in Qantas's accounts and may help reported net profit if it allows Qantas to sell more seats.

A sell-down of the frequent flyer program would see Qantas receive cash and also record a one-off accounting gain on the sale.

For this reason, the most likely scenario is to spin it off and form a strategic alliance and sell a strategic stake to American Express or the listed loyalty program company in Canada, Aeroplan, which was spun out of Air Canada a few years ago and listed in 2005. That business has now morphed into a retail operation that manages the loyalty programs of more than 60 companies. More importantly, Aeroplan now has a much bigger market capitalisation than Air Canada.

Dixon will keep a majority stake in the business, because the last thing the airline would want to do is lose control of this business, given that it has 5 million customers.

Qantas currently earns a revenue stream from selling non-flight rewards to its 5 million Qantas Frequent Flyer members. This business generates between $100 million to $175 million a year in pre-tax profit. If these earnings are re-rated as a retailer at 20 times instead of the airline's seven times, it would be worth between $2 billion and $3.5 billion.

So, for the next six months Dixon has a lot of decisions to make, including whether he stays on or retires earlier than the expected June 2009.

Sources close to Dixon say he had hoped to be gone this year, but that was before all the industrial relations problems. In the meantime, camps are forming around the three contenders: Peter Gregg, John Borghetti and Alan Joyce.

Whoever gets the job will be taking it at a time when conditions are about to get a lot tougher for Qantas: record high fuel prices, a blowout in debt from the need to replace its ageing fleet over the next decade, vigorous competition on the international sector from carriers such as Emirates. Worse still, the Qantas share price has been dropping like a stone since the private equity deal failed just over a year ago.

Source: The Australian, 9 June 2008, http://www.theaustralian.news.com.au...rom=public_rss

Was forwarded the following public post below by a Qantas pilot mate. Seems the AIPA President would support 3% pa plus another 3% pa at risk as a solution?

"The newspaper link: http://www.theaustralian.news.com.au/story/0,,23831633-23349,00.html?from=public_rss contains a lot more than just:

'Qantas, besieged with higher oil prices and the need to replace aircraft, is likely to cut back both domestic and international flights'.

And personally I found the following sentence quite worrying:

'(Qantas) is taking a significant hit from the fuel prices, as well as industrial disputes, (but) the national carrier still stands to make a $1.5 billion profit this financial year. The big question mark is over the 2009 and 2010 profits if oil prices continue to rise, and strikes intensify.'

While the price of oil might not come back, regretfully strikes can't help but intesify unless senior management can come up with a compromise that will not necessarily cut the real wages of staff like our LAMES if the price of oil does fall significantly some time before 2009 and Qantas continues to make comfortable profits over the life of their EBA.

There are solutions which can mitigate the sky high industrial risk facing Qantas right now. However given that:

'The Australian understands that one of the key architects of Qantas's industrial relations strategy is an outsider, former ACTU official Ian Oldmeadow, who is renowned in union circles for being confrontational.'
They are unlikely to be the ones that Ian Oldmedow Consulting has been pursuing with the ALAEA thus far. The obivious answer, which by the way, is well supported by certain fund managers who hold significant share holdings in QAN is: Instead of argueing over a certain 2%, (and waiting to see if the sky falls in, or it really is blue beyond the clouds), why not agree not to pay the 2% in dispute if the clouds don't clear but pay 4% at risk should blue sky appear. Assuming QAN's executive at risk bonuses continue to pay out at 75% on average, in the long run, the LAMES should get an average of 3% pa and QAN $hareholders will smile all the way to the bank."

Hope he is on good terms with Paul and Steve. :D

6. QF revenue growth has been more than double that of wages over the last three years, despite the rapid rise in fuel costs in the same period. That equates to a Group-wide improvement in employee efficiency, or "the ability to generate revenue per man-hour".
7. "Independent financial analysts (Citigroup, Deutsche Bank, UBS, Macquarie) conservatively project that QF revenue will continue to grow at an average of approximately 7% per annum over the next three years". Therefore, a 5% payrise over the next 3 years is affordable.
8. QF earned more revenue per employee than the domestic airline sector average: $443,000 vs. $436,000.
9. A 5% wage claim wil cost $360 million IF it flows to the rest of the company's employees. Fat chance of that happening. All staff may deserve it, but few have our leverage. And so what if it did flow through? The company can't afford 0.52% of revenue to help sustain that revenue, rather than piss people off and guarantee that revenue will fall more than that from a disengaged, un-inspired, under-performing workforce?
10. QF has increased international fares by 33% in the last 9 months, so fuel costs are being largely passed onto the customer, not eroding the bottom line, and not removing QF's ability to give us a fair pay-rise.

it is starting to hit the fan. a junior manager at the airport has informed me that all the costs of delays are now being collated. this includes meal vouchers, taxis, buses, hotels. the figures are blowing budgets out of the water. these figures do not include lost revenue for punters put on other carriers to make connections nor the punters flying VB because they are losing ,or have lost, confidence in QF making flight schedules. nor have lost revenue projections yet been made of thos who will not fly QF again (until VB stuffs up). senior managers are seeing bonuses going down the drain and are starting to bitch with each other as to exactly which port is going to carry these costs. your engineering managers are devastated (non bonus) and will be horrified if the dispute continues into the next financial year (starts july). it seems your limited actions are starting to hit some hip pockets. maybe they should all blame FOG

p.s. add 'you know who' to your ignore list. it makes this thread a lot more fun to read when you can't see his posts but you get to read the replies

In 20 years here there hasn't been blue sky beyond the clouds.
I very much doubt that would change if our pay rise
depended on it.
On another note, does anyone know anything about an
announcement regarding our 767 fleet?

Sources close to Dixon say he had hoped to be gone this year, but that was before all the industrial relations problems. In the meantime, camps are forming around the three contenders: Peter Gregg, John Borghetti and Alan Joyce.

The board has hired an outside agency to look for a new CEO. I don't think Mr Cliffard is interested in any of these 3 amigo's. They have been tainted by GD's management style and can't work together. Separate business units dont work because everyone wants to rape each other to make their department look good!

Today's Perth 747 delayed ex Syd..and cannot get back into Syd tonight pre curfew..opting to Mel from Per for overnight.

I read an interesting article by David Potts in the Sunday paper titled “Pressure at the pump may turn positive.”

He made a few key points arguing that the oil price will fall:

• There’s plenty of oil, producers are lifting production and OPEC insists inventories (stored oil) are rising.
• There is currently a lack of spare refining capacity. When a refinery goes down for maintenance etc, speculators buy oil futures which has a disproportionate impact on the oil price.
• However, more refineries are coming on-stream in Asia, increasing supply, and some Asian countries are cutting back fuel subsidies which is reducing demand.
• It’s also the weakening US dollar that is partially contributing to the oil price rise, as oil contracts are priced in US dollars.
• The US Federal Reserve, and other nations’ central banks, don’t like a weak US dollar, and will take action to strengthen it before it causes inflation.
• A falling oil price (due to improved supply vs. demand) and a strengthening dollar would cause the speculators to dump oil futures, further decreasing the oil price.
• Increases in the share prices of oil stocks on the world’s share-markets are not matching the climbing oil price. The reason: the smart money is on the oil price falling again.

So, hang tough. Let’s hope GD plays into our hands by lunging out this EBA negotiation to try to break us. The longer we play this, the more chance we’ll see oil prices start to trend down, calling his bluff.

QF cabin wrote:-

Today's Perth 747 delayed ex Syd..and cannot get back into Syd tonight pre curfew..opting to Mel from Per for overnight.




Only if they have an appropriate licensed LAME on duty tonight, suggest a good time for another sickie.

Twister is on the money.
Sources in Maint Watch say the way things are building, 2 weeks will see the ****e really hit the fan. We need to take no action at all. Just wait. Carry on as usual.

Nature is taking it's own course. The Companies system is it's own worst enemy.

Having said that watch your backs guys and support your mates. There are some very low lifes watching us.

Just do your job and it will come to us.

Further to the delayed Per today..it's actually an Airbus, but still on the ground in Syd ..

Think we are all beginning to notice the lowlife,s come to life-doesnt take long-huh.
Often they just open their mouth,say something and u think BINGO.
In normal times they would probably get away with it but now we are a lot smarter and aware and unfortunately for them,their little world is slowly falling apart.

Oil Prices
 

Konehead dont worry about the price of oil.It shouldn't effect our pay claim. The only thing that is relevant is inflation.

I'm not worried about the price of oil. I just want GD's fragile argument for restricting our wage claim to collapse like a house of cards.

One thing QF needs to think about is that due to
all the lies told and new bad feelings between the
2 parties,
The boys may now not accept 5%!

The further down this path I go, the
less likely I am to return to being the
"model employee" I once was and
SP, I really do want MH's head.

The Price Of Oil
 

I read in the BRW last week that Qantas has hedged 90% of its fuel costs to $70 a barrel this year and 33% of its fuel costs for 2009 to $90 a barrel, so what is the big deal over fuel costs affecting our meagre, (small in quantity, poor in quality) 5% wage claim.

When I joined this company the wage rate for licensed engineers was around 60% of a flight engineer's wage.

If you look on wagenet.com.au now,which lists every federal award in Australia, you will find that it has now decreased to less than 30% of an FEO's today.

Where is the fairness and equity in that.

NAMES
 

Scabwatch these are the people working overtime in cairns. Call ins, Geoff higgins, Mark Weston, Shift extensions Mark Weston, Geoff Higgins, Beal Beal , Steven Prucha, Steven has only done one. But the others are doing as many as they can to undermine fellow workers.

Change
 

I agree the 5% isn't negotiable it set in concrete now, keep on plodding along guys till June 30, the changes that MH RH DM AW KM have implemented to slash budgets is finally coming back to haunt them. The reduction of manpower at the SIT, at Base and the ridiculous changes to Maintenance watch has seen the fleet become unreliable. If ever there was any doubt of trust between management and workers, it is totally dissolved. I honestly cant see anyone from any of these departments believing anything that the managers say anymore....The new Operations Managers, Nick named "Toothless Tigers" will no doubt be out to impress all the guys and to make a name for themselves....funny how these things are last minute grasps of trying to get the business back to normal...make you wonder why we bother having these so called managers....

hmmm, two days of despatch reliability of OVER 80%........

I feel demoralised....I leave you blokes to it for a few days and look what you do.............

more effort boys, you obviously aren't looking for those defects properly!!

ps, is EBY out yet ???

Spanner twister, have you been to a LAME EBA Feedback meeting ?

I think you have because at the one I was at the President said quote

"Wait patiently by the river and you will see the bodies of your dead enemies float by"

unquote

It is not his, it is from a very old but distinguished book called 'The Art of War' by Sun Tzu

Someone is doing their homework

EBY tomorrow, maybe.

ACS LAME,
I think you are spot on the money. Asking around the crew last night (and other crews on shift), it seems that the majority of LAME's are very happy to let this action roll on slowly. And the headline 5% is no longer acceptable. I think the guy's are enjoying the big boost in moral the last few weeks more than anything, and know it will die down when this is all over.
I would vote down 5%, and would like the overtime bans and stop work meetings to continue for another 6 months at least. I have never worked so hard, and unified with my brothers. These are definately good times.
Those acting Snr's, Supervisors and DMM's trying to make a name for themselves by cutting corners and pressuring young LAME's, we know who you are, and we will remember you.

PS; to sickofqf, re 80% dispatch reliability.

I believe they call it the "dead cat bounce".......

Reply to OT Scabs
 

Well I think almost all at the SIT are not working OT after shift, except for the show ponies doing trips to Queenstown and Noumea...they will be remembered..

They will all be remembered. We will never forget.

Come on guys, it's hard times with the price of fuel and all!

How about 10% for last year, (the year of record profits and more productivity than expected).

And we give in a little and take 3% for the next 2yrs?
Just to help them out in these hard times? :E :ok:

Sounds fair.
With no removal of any of the items offered in the proposal full backpay (Shift, regrade O/T etc) of course, NO EXECPTIONS!

Any profit in year 4 = CPI + 2%. Just as a sweetner so you dont have to say sorry.:( Just FOG & Team.

But we still need these quotas sorted out.

We all pay for the high price of fuel, not just Qf. The only diff is that Qf has been making more profits as the oil price has been rising (since jan 2006, our last payrise), and of course we have not.

Yep, the fools doing the trips and bignoting themslves will never live it down. Wether through stupidity, being naive, scared of retibution, being bullied or plain old pushing their own cart they are now damaged goods.

If you are committed you will easily come up with a reason why you cannot do their bidding. To comply and bend over is self destructive and will not do any good as a whole.

To the guys who are basically being selfish and thinking (stupidly) that their managers will pay them back for basically being scabs, enjoy fellas the price to pay is huge.

Also, when we get our money I hope the guys who are doing the OT and trips donate their pay increase to charity. You guys don't deserve it so give it to those who do.

No OT after shift is being done in Sydney that I have heard of. CNS guys that are doing it, you guys will reap what you sow. Karma IS a bitch!

Its great to see so much unity and support between LAMEs. SIT no o/t. Base no o/t. Mel no o/t. Mel Hgr 23 from 26 sick on one day. Mel Dom refusing to chock 747 aircraft. So many hold items being entered day after day by supporters in Aus, Sin and Lax. Work to rule in place Adl and Per.

and u fu**ers in Cairns have 3 scum working more o/t than they have in their lives.

Is it true that one of them learnt from his father who was a $cab in 89?
Another sat and watched the asn spend $60,000 to save his brother who was on manslaughter charges after he was involved in maintenance of an aircraft that turned into a coffin.
Third thinks he is the Be al and end all of LAMEs

Just because you amigos hide up in the tropics, do not think you will be forgotten. You will all be remembered for just what you are.

Price of oil goes up, airline travel costs more...

Price of oil goes up, everybody who pays for fuel in their car takes a pay cut!:ouch:

Who pays for GD's fuel? Bet he doesn't dip into his wallet, except to drag out a corporate card (that we all pay for!).

It's not just oil, the flow on means that almost every consumer goods will cost more due to increased transportation prices.

So do you think that the prices will fall when the price of oil comes down? Not a chance, the shareholders wouldn't stand for it!

The Masked Goatrider
 

A lot of the guys up there in CNS are towing the line. Three bad eggs dont make the dozen mate.

For the sake of those making the effort in CNS. I hope you all support them and I hope you all dont forget the 3 mentioned.

Gingerbread:

Whoever thought this idea up is an idiot. Don't accept it.

For a start, there can be no trust, and in any case Qantas profit figures can be any number the management chooses.

Furthermore, as has already been stated elsewhere in this thread QF profits are headed South for the next three years while they borrow to pay for all these new aircraft, so the chances of receiving some "blue sky' are minimal.

But wait, there is more. For any person who calls himself a manager to push "Bonus Schemes" this way would demonstrate their incompetence. For a start, bonus schemes have historically been responsible for more industrial mayhem than pay negotiations, as any manufacturing engineer will tell you. So anyone pushing this line is either dumb or plans not to be around when the proverbial hits the fan.

As a general rule, bonus schemes can only work where the employees involved have some control over their performance - which is not the case with a maintenance organisation, nor should it ever be, since it creates an incentive not to put safety first.

On the other hand, profit sharing is another thing, and should be encouraged.

However, the rate of inflation marches on inexorably, and there is no way that compensation for it can or should be tied to performance.

I am really confused on this one boys/girls. Every time GD opens his trap the doom & gloom begins, especially about oil/fuel prices atm. Heres the prob,
On sunday the qf31 left syd @ 2230 (5 1/2 hrs late) with only 3 PAX on board.
Yes you read it right, 3 PAX on board, apparently most pax were put on the qf5/ BA & SQ due to the delayed QF31. Why would you put 80 tonne of fuel on board and fly empty. GD maybe you can answer this when the fedesec asks.
Any thoughts cause my head is hurting?

This LAME you refer to here wouldn't be the same LAME from Melbourne who only transferred to Cairns after being constantly knocked back for a line spot in Melbourne would it ??? SC ???

How is the delay situation looking?
It seems that QF got a bit of a reprieve
over the weekend.
Is EBY still in the shed?
How did our international network fare?

Hi masked goatrider

Name and shame goatrider! name and shame son! :D

Have been advised that travel to Noumea is now a list 1 offence.

The "I am a stupid fool" excuse will no longer be valid.

Qantas braces for safety compliance shut downs
From crikey.com.au

Qantas braces for safety compliance shut downs
Ben Sandilands writes:

No-one is putting hard figures on this, but Qantas faces widespread safety compliance enforced shut downs of its inter-city services by the end of this week unless it resolves its dispute with the maintenance union.

Several dozen Boeing 767s, the back bone of the Cityflyer services, are running out of time to have defects corrected.

A spokesman for the Civil Aviation Safety Authority said this morning he knew of no arrangements to extend the legal period in which multiply defective jets can continue in service.

The painful reality for Qantas is that it is being done slowly but thoroughly by the Australian Licensed Aircraft Engineers Association which is supporting its demand for 5% pay rises rather than the 3% on offer with over time bans.

There appears to be a scab shortage.

The union members are still working, and being paid, and the airline is grinding to a halt around them.

The airline can’t find enough qualified people in management to check and sign out jets for their next scheduled flight, even if they are within a period in which defects, which may include small cabin pressure leaks as well as blocked toilets or drains, are allowed to fly unfixed.

In recent days Qantas has diverted some international 747s to routes like Sydney-Melbourne to take the pressure off the 767s. Unfortunately the 747s are hard to efficiently load and unload between short flights, compounding the frustration for travellers already displaced by fog closures at major airports.

There are unconfirmed reports of Melbourne ground engineers not trained in 747 operations refusing to handle the jet in accordance with company rules, and being docked four hours pay for refusing to engage in what is technically dismissible conduct in service a jet for which they have no qualifications.

There are complaints from travellers that the Sydney-Melbourne trip is taking up to 6-8 hours by air, totally destroying the typical day trip to do business between either.

It can be driven in 10 hours at street legal speeds with several rest stops.

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Reply to Scab Watch's post #2181
 

It is reliably rumoured that 99% of the blokes at BNE Heavy H3 have so many family activities on and so much work to do around the house that they have been completely unavailable for overtime lately...