When The Band Breaks

Locally things aren’t nearly as desperate, but there is a fascinating dynamic at play.

Record high fuel prices are putting the squeeze on all our airlines, with all three of the majors trimming their sails by cutting flights and retiring aircraft, to better prepare for rough waters ahead. But Qantas, Jetstar and Virgin Blue are all also desperately grappling with recruitment and retention issues as they try to ensure they have enough pilots to fly their still growing fleets and aircraft engineers to maintain them.

So what happens when these opposing forces – fuel price driven reductions in flying and fleets (or at least fleet growth) on the one hand, and labour shortages and industrial relations issues on the other – meet in the middle? All of our major airlines are gearing up their training and recruitment machines for the fast traffic growth rates we’ve experienced over the last five years (nine per cent domestic growth per annum, according to BITRE) – indeed until recently Virgin Blue’s strategic planning was based on an annual growth rate of seven per cent – so a slowdown in the rate of growth might be a blessing in disguise, at least from a recruitment/ retention point of view. The shortages of pilots and the industrial unrest with Qantas’s maintenance engineers probably meant our airlines may well have struggled with their ambitious growth plans (if they weren’t already), so a slowdown might be welcomed.

But what happens if the current troubles are not just a blip, but crude oil prices approaching US$150 per barrel are the new normal? What if these fleet and flight reductions are just the start of a downward cycle? Qantas, for example, says its fuel bill in this new financial year will be some $2 billion higher than last year’s. This potentially bleak outlook frames a fascinating, possibly troubling outlook for those working in the industry. If fuel stays at current levels, let alone rises, the industry’s recent run of record growth will come to a shuddering halt, bringing with it pain for employees through job cutbacks and the winding back of recently ramped up training programs.

Australia’s major airlines have the balance sheets to survive major stresses in the short to medium term, but that’s not to say there won’t be pain along the way.

One area of the industry where the elastic has already seemingly snapped is Airservices’s air traffic control services. At its ‘Waypoint’ industry conference in Canberra in late June the air traffic services provider revealed that in 2007 its near 900 strong air traffic controller workforce took no fewer than 15,700 sick days, or over 17 days each. Not coincidentally, at presstime there was a spate of well publicised incidents of controlled airspace having to be shut down due to a shortage of controllers.

With huge amounts of sick leave being taken, and huge pay claims by the air traffic controllers’ union, it’s clear there are significant issues within Airservices, and the industry is bearing the consequences of lack of controlled airspace services with resultant higher pilot workloads and increased safety concerns.

Airservices is already implementing plans to overcome the shortages (see from p24), but it’s no wonder its controller force feels emboldened to ask for big pay rises when the organisation is already short of controllers.

Those pay negotiations hold the promise of being every bit as contentious as that between Qantas and its engineers union, which was still rumbling on at press time.

Both the controllers’ and engineers’ unions are in apparent positions of strength, but with the airline industry’s good times now seemingly behind it, their timing in asking for significant pay rises looks to be well ahead of what the industry will soon be able to afford.

Anyone else hear the elastic being stretched to breaking point?