Qantas's management is facing confrontation with unions over a new wage agreement as it launches a drive to try to control costs and improve on disappointing productivity gains.
Flight attendants and ground workers have already hinted at industrial action if they fail to win agreement on across the board pay rises of up to 10 per cent, a claim Qantas says will add more than A$500 million (US$390 million) a year to costs.
Qantas managing director James Strong was set to meet with union officials at presstime in a make-or-break confrontation aimed at hammering out a deal, though signs for an early agreement were far from good.
Both the Flight Attendants Association of Australia and the Transport Workers Union have indicated they will consider strike action if the airline refuses to come up with an improved offer.
Unions are particularly angry because their counterparts at rival Ansett in July won agreement with their management for an 8 per cent salary increase over two years and a 50 per cent share of productivity benefits. Flight attendants have been further angered at plans by Qantas to recruit more crew offshore, saying it can't find sufficient staff in Australia with Asian language skills.
But Qantas group executive general manager operations Ian Oldmeadow says the airline won't agree to a deal involving a pay-for-productivity swap. The airline argues it has achieved little from previous deals based on efficiency gains. Oldmeadow says productivity improved last year by only 1.1 per cent.
The carrier is looking to cut costs in other areas, as well, as it prepared to announce operating profits of around A$400 million for 1995/6 at presstime. This figure is in line with forecasts in the privatisation prospectus, but A$50 million short of the target set by Strong. In an internal newsletter, Strong told staff he is postponing major expenditure on aircraft and growth for at least a year as part of a wide-ranging review of costs.
He said profit margins remained too low and stressed a return of about A$450 million in annual pre-tax profits was needed 'for Qantas to grow and provide secure employment'. He has decided 'to defer any further major expenditure on aircraft or expansion until we improve our cost competitiveness over the next year, or however long it takes.'
Sources at the airline say the decision was not an easy one to make, especially in terms of the carrier's competitive standing. It means putting fleet upgrading on hold at a time when nearly all its major rivals in Asia are committing to orders for new aircraft with deliveries scheduled before the end of the decade.
Strong will be hoping to avoid a damaging strike by emulating the success of Qantas' main partner British Airways. The UK carrier averted action by its pilots in early July with an eleventh hour deal.
Tom Ballantyne
Source: Airline Business
