Qantas Cuts Reflect Boom And Bust Cycle

The cuts are designed to save Qantas $243m in a full year in 1990 dollar values. Of this, $161m will come directly from staff reductions whilst $82m will come from savings achieved through revised operating procedures and streamlined management practices at virtually every level of the airline.

Though a total of 18% of QF staff are affected, in relative terms the axe fell heaviest in the corporate ranks with some 30% of the 1,150 staffers affected. To this end a complete level of management will be eliminated with the result that there will now be just four levels of command from the shopfloor level to senior management. This is designed to eliminate the trend towards developing a corporate bureaucracy whilst enabling middle management the opportunity to have a greater and more direct say in the day to day events affecting their particular area of operation. The end result of this long overdue reform should be to increase productivity, enhance area effectiveness and increase staff morale through them having a greater say in their area of responsibility and a better appreciation of how their unit fits into the entire scheme of operation.

In numerical terms, the biggest cuts come in the cabin services area with the elimination of 706 flight attendant positions. This has naturally not been taken lightly by the FA union involved, though many observers feel that the airline will require additional FAs again soon as inbound traffic trends suggest a significantly strengthening Australian market for the 1992-95 period. One short term reason the airline can do this is that it has cut projected flying hours for 91/92 to around 170,000 as against 202,000 in 90/91. This has also allowed a number of pilots and flight engineers (238 or 15%) to be dropped, though most of these are being seconded out to Asian airlines, such as JAL, who are looking to boost their tech crew ranks in the short term.

Another area that saw some surprise retrenchments was engineering and maintenance (E&M) where 563 (15%) positions have gone. Considering the problems that have visibly afflicted the airline in recent years due to the lack of engineers, it is indeed a surprise that anybody would be dropped from this key area, particularly now that Qantas is just getting back to the position where it can again take in valuable cashflow generating third party work. One reason for this, apart from the reduced flying hours and similarly reduced maintenance requirement, is the wholesale introduction of new generation 747-400 and 767-300 aircraft replacing older 7 47-200s, nine of which have departed the fleet over the past year and a half . The maintenance man hours per flight hour on the new aircraft are significantly less than that required for the older -200s, whilst the forward schedule of labour intensive D checks over the coming three to four years has also been reduced through the earlier than originally planned disposal of older jets.

Other areas to be cut included baggage handling,check-in and boarding staff, down 15% or 345 positions. Catering 238 (17%), local and overseas sales 400, freight 105 (12%), computer reservations 29 (22%), Safety 6 (35%) and security by 34 (51%).

Another area of Qantas that suffered heavy cuts was its three year old computer arm, Qantek. Qantek saw 318 positions in its previously 841strong workforce dissolved a purveyor of external services for other operators have been put on hold. ODS, which is responsible for Fantasia, QF’s CRS system, also saw 29 of its 129 workforce go. However, there are fears that if the airline enjoys a rapid comeback, as is expected, then it will quickly run out of both computer capability in hardware and personnel terms if all the above mentioned attrition takes place. This could be particularly exacerbated in an environment where a strengthening economy will put a premium on computer specialists at a time when the airlinemight find it difficult to attract experienced operators due to the lower wages that airlines typically pay in comparison with competing industries.

So, what of the future? To see where Qantas might be a year from now is not a difficult scenario, barring a rerun of the domestic pilots’ dispute, war in the Gulf and a doubling of fuel prices! Indeed it is the latter three

that have largely been responsible for the massive decline in our national carrier’s fortunes these past two years.

Another problem though was ironically the popularity that Australia and our airlines enjoyed right up till early 1989 when the economy began to finally reel from the effects of debilitating interest rates, slowing domestic growth and an international inbound tourism market that had largely made the Bicentennial year of 1988 the year to see Australia. Prior to this the carrier was enjoying record growth of up to 25% in one year with a virtual doubling of traffic between 1984 and 1988, something that led it to no alternative but to rapidly hire additional staff, retain older planes and even lease in external capabilities to meet demand.

By mid 1989 though the bubble had well and truly burst. The damage caused by the AFAP dispute through the final months of that year (when overseas tour wholesalers simply stopped booking Australia due to an understandable lack of confidence in our internalair transportsystem), worsening recession, the Iraqiinvasion of Kuwait, soaring fuel prices, full blooded war itself and a massive decline in air travel, plus the effects that domestic airline deregulation are now having on Australias’ fascination to holiday locally at the expense of overseas destinations have all led to the

inevitable shedding of 18% of the QF workforce. With the C&L report now history, it is hoped that Qantas will

again become profitable during 1991/92 and will be able to record a modest nett return for the just completed 90/91 fiscal year, albeit with the help of seven outbound 747s which fortunately were sold at peak market prices.

Another critical area that also needs to be addressed is that of equity financing. The airline’s present 80:20 debt to equity ratio is one of the a primary reasons why Qantas is nowadays suffering as it does. It is time that its one shareholder, the Federal Government, bit the bullet and injected the necessary funds into Qantas to get its debt to equity ratio back to a more realistic 50:50. The reduction in interest rates alone would be worth several hundred million dollars annually to the airline and would thus be added directly to the bottom line, making Qantas an even better investment in a privatised environment.

Note: This article is an expanded version of our news item in July AA.