Issue 69: August 1991

The economic pulse of a nation always has its highs and lows as the western world’s democracies sprint continually from boom to bust and back again to boom. The profitable years preceding tnis present recession (which few Australians quite rightly feel we had to endure with such severity) were one of the best in Australia’s modern history. Unfortunately, for many within aviation the seeds of disaster were being sown through the mid to latter eighties as our transport and tourism infrastructure was swamped by a tidal wave of inbound traffic necessitating substantial fleet and workforce restructuring. When the bubble burst in mid 1989 it impacted upon an industry flush with capacity and very high employment rates. Thus winter 1991 probably will be long remembered as the time in which the inevitable chickens came home to roost as thousands of jobs within the aviation industry went up in smoke.

On the final day of May the long awaited major restructuring of the Civil Aviation Authority was officially announced to its 7,000 plus employees. That just over half of them would not have positions five years ago was something that was generally expected and while naturally lamented by many within the Authority, it was generally seen by the CA/!\s client, the aviation industry, as a move in the right direction.

Of course, like everything, it depends upon what side of the fence you straddle. If it is your position that has just been terminated then it is difficult to get enthusiastic about the cutbacks. If you, on the other hand operate a small GA concern then you might just feel that at last the battalions of long secure government employees can now feel the uncertainty that is a part and parcel of the real world private enterprise lifestyle.

Within days of the Canberra announcement as to the loss of 3,600 jobs within the CAA, Qantas also announced that in its 71st year it too would be laying off a similar number of employees. However, while the CAA will attrition its personnel over four to five years (though with a third of the departures occurring within the first year), Qantas will be seeing all of its 3,700 people leaving before October. That represents an overall cut of 18% for a company that up until recently employed almost 21,000 people.

Really, when you think about it, Qantas couldn’t win.

Let’s roll back the clock. It is around 1984 and Australia is just beginning to claw its way back to growth following the debilitating early eighties recession. Growth returns as Australia begins to be discovered internationally as, amongst other things, a potentially great place to visit. The Crocodile Dundee era begins and Australia’s flag carrier is suddenly faced with an onslaught of bookings that soon present it with significant employee and equipment problems in that it has not nearly enough of either. Hiring begins in a big way as does the leasing in of additional aircraft, retirements are deferred and even recently sold 7 47s are leased back.

In the meantime, a tactical decision to stop training specialist ground engineers and associated support staff during the early eighties begins to take its toll as Qantas has to begin sending aircraft offshore for servicing in addition to ceasing its once lucrative third party maintenance work. This is a major blunder that hopefully will never occur again, though looking at the number of E&M personnel being terminated in the most recent cuts makes one wonder The Expo/Bicentennial year of 1988 proceeds amidst an avalanche of tourists and just a few of the smarter people begin to feel that perhaps this is the peak of the traffic surge. They are not wrong. Nineteen eighty-nine arrives and Australia’s economy begins to stumble under the pressure of politically induced crippling interest rates. Inbound tourism flags as many people who intended visiting Australia in the late eighties did so in 1988 and by mid year we are entering our third consecutive quarter of declining domestic airline activity.

Enter the Australian Federation of Air Pilots and their ill-conceived sor tie towards mass suicide as they take 6n their employers, the AC TU, the Government and the vast majority of Australians who clearly don’t suppor t their 29. 7% pay claim which is greater than the average worker’s total wage. To almost everybody, the inevitable outcome is clearly obvious by the end of the first week of the dispute though this is somehow totally lost on the AFAP leadership and its members as they flight plan a course to oblivion. In the meantime Australia’s already cooling tourism industry is decimated and the four major airlines between them lose something in the order of a half billion dollars during 1989/90 alone.

As we enter 1990 the domestics are getting back to near normal schedules, only much of the outside world still believe that they aren’t and goes elsewhere. Qantas is losing heavily as its massive commitment to extra capacity and personnel nowhelps fly towards its first massive loss in many years. It is only during the middle of the year that things begin to stabilise and traffic both domestically and internationally is at last looking as if 1991 might be a viable year.

Enter Saddam Hussein and we have the final act in how to destroy an international airline. Soaring fuel costs, traffic down by as much as a third on some routes, too many staff and Qantas’ very high debt to equity ratio begins to finally take its toll.

Obviously, to have been able to foresee all of these events is something that is truly beyond even the greatest clairvoyant. The battle now will be to get Qantas ship shape again. Reduce its employee and management structure to something much more effective and efficient than it recently was and to make the most of its relatively young fleet of advanced technology aircraft.

It is also time for the Government to put a considerable amount of cash back into Qantas’ pockets to get its debt to equity ratio back to something in the order of 50:50.

Meanwhile Australia’s other Government owned airline is also about to take moves towards shedding up to 1,000 staff. Australian, like Ansett, built up a plethora of additional overheads and personnel during the heady days of the late eighties under the benign protection of the Two Airline Policy. The cold winds of deregulation and economic recession now naturally demand that Australian, and also Ansett, shed any remaining fat to ensure that they can compete effectively with a lean newcomer like Compass.

This is all bad news for employees of the CAA; Qantas, Australian and ATI. However, even members of the Australian Defence Forces (ADF) are not exempt from the real world anymore and so during late May the long awaited Force Structure Review was announced with around 10,500 ADF positions being axed over the coming six or seven years.

Most of this will be via attrition whilst the many opportunities available for industry to fill the void will hopefully absorb some of the more capable people who will be depar ting the ADF and perhaps even the airlines.

So much for the winter of ’91. The next year can only get better, and hopefully it will.