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Virgin defends new staff terms after joint union attack

written by Adam Thorn | September 23, 2020
VH-XFD Virgin Australia Airbus A330-200 - 2992019
VH-XFD Virgin Australia Airbus A330-200 shot on 29/9/2019 at Brisbane Airport (Craig Murray)

Virgin has defended the new terms it has offered employees after unions yesterday branded them “savage” and claimed they would lower safety standards.

“The changes we are seeking will shape a future for our airline that is sustainable for the long term and will mean we can save more jobs,” a spokesman told Australian Aviation.

Yesterday eight unions, including the TWU and AFAP, signed a joint statement in which they launched a wide-ranging attack on the airline’s new owners, Bain. It came as the two sides are attempting to negotiate new enterprise agreements underpinning terms and conditions, which have expired.

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Bain beat out Cyrus Capital Partners in May to become the administrator’s preferred bidder for the airline but the decision was only rubber-stamped at a final creditors’ meeting on 4 September.

On Thursday, unions and executives are due to sit on the first meeting of a new advisory council, designed to give staff a say in the running of the business.

“The COVID-19 pandemic has decimated our industry and the impacts are expected to last for a number of years, and this makes the need for change even greater,” said Virgin.

“We are targeting all areas of our business to reset our cost base and get the certainty we need to be able to plan for our future flying schedule when demand returns.

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“We are not alone in needing to reduce our cost base and remain competitive in our industry, and will continue to work with the unions to support the best outcome for our business and team members in response to this crisis.”

Yesterday’s letter made a series of claims, including that Virgin are using the new enterprise agreements to “drive down conditions”, that there was a “lack of knowledge” of the business’ traditional brand and culture, and even hints they believe a lack of airplanes available to fly suggests more job cuts are coming.

“Workers are alarmed at the shortfall in aircraft designated and ready for flying,” said the statement. “Despite a promise of 75 aircraft there are just 56 ready for flying. They will be questioning Bain on how it plans to keep 6,000 workers employed with less aircraft operating.

“It is incumbent on Bain to show it can listen and learn from workers who have helped build Virgin up. Bain must show it can focus on maintaining the community trust that Virgin has created over the years rather than morphing into a dictatorial culture.”

Yesterday’s letter was the latest sign the airline’s relationship with unions is in difficulty.

Earlier, relations with the TWU broke down before the sale was complete because of Bain’s refusal to dismiss speculation former Jetstar chief executive Jayne Hrdlicka could be the new chairman.

Hrdlicka had a notoriously fraught relationship with unions in her role at the Qantas Group.

In fact, the TWU only backed the sale to Bain at the 11th hour, and then warned the new owners “must listen to workers and utilise their skills, energy and experience in rebuilding the airline”.

The letter was jointly signed by eight organisations:

  • TWU (Transport Workers Union)
  • ASU (Australian Services Union)
  • VIPA (Virgin Australia Group Pilots)
  • FAAA (Flight Attendants’ Association of Australia)
  • ALAEA (Australian Licensed Aircraft Engineers’ Association)
  • AFAP (Australian Federation of Air Pilots)
  • ETU (Electrical Trades Union)
  • AMWU (Australian Manufacturing Workers’ Union)

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15 Comments

  • Ian

    says:

    We are becoming Americanised in more ways than one. I see the term ‘airplanes’ being used mire frequently recently in articles written by Australian journalists. I wish we could stay with ‘aeroplanes’ and ‘aircraft’

    Hopefully though, the Americans will be able to rejuvenate VA without too many staff losses, with fair treatment of remaining staff and with a plan that sees the fleet of aeroplanes and the network restored as much as possible to what it was.

  • Joseph R Cleworth

    says:

    Unions are made up of people who
    need income to live and purchase the essentials and are part of the cycle that is essential for us to exist

  • Rocket

    says:

    “Yesterday’s letter made a series of claims, including that Virgin are using the new enterprise agreements to “drive down conditions”, that there was a “lack of knowledge” of the business’ traditional brand and culture…”

    Lack of understanding of the business and the industry maybe, but there are many people in VA, particularly in management and middle management who are incompetent and have demonstrated so time and time again, the airline seems to have been run on a haphazard set of non-principles scatter gunned with “the CEO wants” resulting in an almost dodgem car approach to managing a business. Buying airlines, then sidelining their fleets then paying a competitor to fly the routes, then launching an atrocious international operation with TT which would NEVER happen at an airline that knew what it was doing.
    Bain may not have a heart of gold but they have to do better at this than previous leadership, anyone could.

  • Rocket

    says:

    … and while I’m pro-union in many ways, they need to be very careful. The on thing that is certain about Bain, is that one way or another, they are in this to make serious money. They do not have a heart, they are respondent to dollar signs. Push the barrow too far with this and Bain may very well say “OK, fine, then we’ll just liquidate everything and no one will have a job”.

  • Ian

    says:

    virgin staff lucky to have a job in aviation. Don’t stuff it up by listening to dumb as unions. It’s going to be very interesting when Rex, qantas & virgin doing BNE, SYD, MEL triangle.

  • Vannus

    says:

    These unions’ are not facing the fact that life has changed so dramatically now, affecting so many businesses’.
    The way all was done before COVID-19, is now NOT able to be done. Fact.
    Bain’s trying to get an airline resurrected from well behind the eight-ball, & these idiots’,& their demands are hindering that process to the nth degree.
    They’re going about it in such a way that their members’ jobs are being well & truly being jeopardised.
    They can’t seem, or want, to get through their thick skulls, that Bain is an American Company, & there’s no love lost by them with unions’.
    They’ve obviously not checked into the core knowledge of what Bain does. Fools!
    I believe the unions’ will be in for the biggest shock of their lives come 31/10/2020, & it can’t come soon enough.

  • Nate

    says:

    To Rocket, above…..2nd comment…..

    Couldn’t agree more with your thought of Bain possibly pulling the plug.
    IF that happens, it’ll be the result of unions’ pushing for pre-covid conditions’ of employment, which now, cannot, & will not, exist.
    The various unions’ are STILL blind to this. Why? Are they SO stupid that they can’t see what’s staring them in the face?
    Apparently this is sadly, true.

  • Rocket

    says:

    @ Vannus
    Having said that, anyone who’s had anything to do with VA knows that it’s no so much the Unions to blame but the almost thoroughly incompetent management from top to bottom… there are just far TOO many stories of competent and experience managers coming in with experience in multiple airlines who are quickly shown the door because they know what the hell they are talking about. Vacancies in fairly senior management positions at line stations being filled with the most incompetent choices, with staff shaking their heads and wondering how total imbeciles can keep getting promoted. It really is very, very bad and the company never moves forward progressively because of this constipation type blockage in the middle, stupid, stupid rules where a voucher for a passenger delayed on a flight(s) can’t be issued locally but a manager has to go cap in hand to some clerical functionary in the Village to get them issued. IT that is crap. In any comparison across the globe, SABRE is a piece of crap yet it was chosen over Amadeus for goodness sake.
    Yes, Unions are a problem but also the thoroughly incompetent and incapable people running the show, topped off for 10 years by an egotistical know-all who spent billions for no return (rumour has it his nickname in QF was “mini me”).

  • Paul

    says:

    Yes the world is hurting as is the entire industry…..BUT The only reason VA is in as dire circumstances as they are is not due to staff salaries, terms or conditions, but because of the complete incompetence of their previous leader, the board and the management team all of which should be held accountable for gross corporate negligence!! But alas no they are all off the hook with golden handshakes while their staff wear the ball and chain. Corporate business incompetence has to see accountability!!

  • John

    says:

    Hit the nail on the head!

    At the top of my head Borghetti and the board were responsible for:
    1. Buying two types of ATR’s (which pilots couldn’t be cross qualified on) on a hand shake deal, that was then given to Qantas Link.
    2. High leases on the ATR’s because he had to have them now!
    3. Had to have A330’s now! So got 2 ex-Emirates clapped out A330’s that in the end ended up being parked in the desert while virgin still paid leases on them.
    4. Got more A330’s and paid pretty much the highest leasing costs in the world for the A330’s. That operation was never going to be profitable because of theses costs and was loss making from start to finish.
    5. Purchased VARA for $100 million (overpaid!). The jury is still out on VARA but what I can say is there is a huge amount of breakdowns on all types they fly.
    6. Retired the Ejets to then park a significant amount of them in the US and continue to pay leases on them all the way until entering administration.
    7. Retired the ATRs to then park a significant amount of them in the NZ and continue to pay leases on them all the way until entering administration.
    8. Purchased Tiger and handed over all of the Bali flying to them from Perth, Adelaide and Melbourne. Tiger and VA management made a mess of things and the Indo’s pulled their right to fly there. So essentially, VA just handed over market share to their competitors.
    – additionally, he decided to get rid of the A320 at tiger and go to a 737 operation. They ended up getting a handful of 737s and also ended up flying the A320 resulting in duplication of crew, parts, costs etc.
    9. Borgs decided to have a war with QF over market share that bled both airlines (we are talking billions).
    10. Borgs and the board continued to increase their remuneration and bonuses during all of this time.
    11. There were countless individuals that were hired to be in executive leadership roles, to then be fired prior to their contract running out and VA had to pay them penalties.
    12. Running multiple AOC’s with duplicated management, inefficient crew numbers on them, extra associated costs, etc.

    ****if i missed some other poor decisions please add to the list (because Im sure there are more that I can’t think of).

    The unions (I’ll speak for the pilot unions) have provided extraordinary flexibility for the company since Covid started and still continue to do so with the support of the pilot group.

    The 737 operation has pretty much been the only continuously profitable part of the airline and the reason why VA could keep its head above water. This was with the current “cost base” of all staff on EA’s.

    The reason why VA was struggling and had a high cost base was because of the near on $7 billion in debt that was the result of poor management/CEO decisions and not because of staff costs.

    Those of you saying that Bain would liquidate in the event they don’t achieve lower EA condition/costs have no clue! Why would Bain pay $3.5 billion to purchase the airline to then liquidate it and not even get close to what they paid for it???? Bain purchased VA because once all the debt was wiped, all leases renegotiated or cancelled and the loss making parts of the business were gotten rid of they know they have a good company. And don’t you think a company like Bain (managing $150 billion in assets globally) would have crunched the numbers on the current conditions that staff are on????

    Rant over.

  • Steve

    says:

    The actions of the TWU in relation to Qantas staff in house bid for Ramp and Baggage jobs, is leaving Qantas staff in a vulnerable position. Have union bosses taken a pay cut or pay freeze? Or reduced member fees for 3 or 6 months? No…..I didnt think so. Shame on you TWU and others.

  • Paul B

    says:

    Well it is a restart for this airline from scratch. The network will initially be smaller and with closed borders you do not need as many aircraft to operate the limited schedule. If the unions think it will be like pre covid days well they are not very business savvy. How many union bosses took a pay cut during covid? Virgin staff have felt the pain, now at least allow them to return to work.

  • Rod Pickin

    says:

    Folk who submit posts in this media outlet do so I believe because they are passionate about their vocation and clearly they have something serious to contribute,I also believe that in their day to day duties they display a good degree of professionalism and clearly in the case of the old VOZ and its demise I really think it is now time to move on; it is very plain that mostly one person was to blame for the debacle which surely wouldn’t endear one’s chance of continuing in a senior role anywhere so folks, lets stop looking backwards, we won’t achieve much at all unless we look forward. As I see it the updated VOZ will have a depleted fleet via lease reductions, a comparatively young fleet at that with many years ahead of them well supported at all levels by a smaller team of professionals at all functions within the organisation. This is not a good time for our industry, gives a new meaning to the word, difficult so we all must make the most of it, smile and move forward. I have to say that Bain was not my favoured new owner for VOZ but it is what it is and we being professionals will move forward and make it work, the alternative is not so exciting.

  • Rocket

    says:

    @ John.

    Bain will liquidate just like they did Toys R Us……. they won’t lose their $3.5bn because they will raise a loan just like they did with TRU and do so in VA’s name on VA’s books and they will pocket the proceeds. They will then, just like TRU, have their money back and if they don’t get the deal they want they will most certainly shut it down, sell any assets that are owned and still walk away with what they put in plus a little more AND the creditors, including staff, will be left hanging.

    This is what PE companies like Bain do, they’re not there for the glory of the airline, they’re there to load it up with debt, hopefully make it trade its way out of that debt and then flog it off in a few years in an IPO most likely (a la Dick Smith, not Bain but another PE company).

    PE do not do it to get the airline into shape, they do it to ‘unlock value’ (read: sell aircraft that may be owned or other assets and lease back, pocketing the proceeds), pay themselves high consultancy costs which will be inherent in the sale agreement, just like TRU, then they will see how it goes and if it goes nowhere, they don’t care because they have their money back and VA carries the can for any new debt.
    If Wesfarmers had bought VA as was mooted briefly at one point, they would have bought it for a long term investment that fit into their logistics portfolio to increase the overall efficiency of the Wesfarmers operation, PE don’t do that, they just want a return as big and as quickly as possible and they don’t care whether people are happy campers or not.

  • Lynton

    says:

    To Rocket above…..

    So far, & I could be wrong, did Bain put that $126mn into VA in May 2020, or did someone else?
    I heard that Bain was only going to allocate $700mn to VA between first signatures’ back in June this year, & 31/10/2020. In other words, they’ve not yet released ALL the supposed ‘sale price’ of $3.5bn funds into VA?
    IF, & that’s a BIG if, they ‘settle’ on 31/10/2020, then funds will start flowing from then on to get it flying.
    The whole situation is just a headache…..& worse for the staff at the coal face.

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