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Qantas Hit By Widening Strikes
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Australia´s Qantas Airways cancelled 35 domestic flights and was moving critical maintenance tasks overseas as a campaign of strikes by engineers widened to the country´s west.
Members of the Australian Licensed Aircraft Engineers Association (ALAEA) walked off the job in four of the country´s biggest cities, disrupting flights in Sydney, Melbourne, Brisbane and Perth, over Qantas´s refusal to grant a 5 percent wage rise.
The airline is offering 3 percent for around 1,500 engineers, prompting a campaign of short-term walkouts, including the current two day strike, that shows no sign of ending. Another strike was promised by the union on Friday.
"If you are able to make AUD$1.4 billion (USD$1.3 billion) in such a tough climate, and you´ve made it off the back of your employees working very, very hard, I think that it is appropriate that you give something back to them," said ALAEA federal president Paul Cousins, apologizing to passengers for disruptions.
Qantas shares hit a two-year low of AUD$2.95 in morning trade, before clawing back to above AUD$3.
"Qantas is one of the most profitable, if not the most profitable airline in the world. But like all airlines, they´re flying planes that are a bit old and a bit thirsty," ABN AMRO Morgans private client adviser Bill Bishop said.
Australia´s biggest airline reported net profit of AUD$617.6 million for the six months ended December, doubling its first-half earnings on strong demand for air travel and trimmed fuel costs.
The carrier, the world´s 10th-largest by market value, said in May it still expected to achieve its target of 40 percent profit growth for the current year, which ends on June 30.
Qantas flies 2,400 domestic flights each week, excluding low-cost subsidiary Jetstar and regional carrier QantasLink, or around 342 flights each day. The strike disrupted around 10 percent of scheduled journeys.
Credit ratings agency Standard and Poor´s revised its outlook for Qantas in May to negative from stable, reflecting pressure on the carrier´s cash flow from a fuel bill expected to rise by USD$1.9 billion in 2008/09.
The airline, like many other Australian firms, is facing a conundrum with inflation running at just over 4 percent, while workers are demanding bigger pay rises in line with a booming resource economy in its 16th year of expansion.
At the same time, consumer demand is cooling, fuel prices are on the rise and employers are looking to cut costs.´
A Qantas spokeswoman said the carrier would not reveal how much the strike was costing each day. But ABN AMRO Morgans´ Bishop said the cost was likely to be considerable.
"Suffice to say it put the share price under AUD$3," he said.
In an effort to adjust, Qantas is looking to permanently move many critical maintenance jobs offshore by employing engineers in London and the United States, possibly antagonizing union members at home.
"We´ll do the work where we think it´s best to have it done, but we´ve always declared openly that we´d like the great majority of it undertaken in Australia," Chief Executive Geoff Dixon told local radio on Tuesday.
American engineers in Los Angeles (LAX) completed two full aircraft maintenance inspections, known as A-checks, in the past 10 days, while other inspections were outsourced to Avalon Airport outside Melbourne.
"Provided the unions want to work with us in trying to make sure that we are competitive, we´ll do it here. Otherwise some of it will go overseas, but we´re not threatening that," Dixon said.
In a letter to staff, Dixon said the Qantas board met in New York last week and told executives to hold out against "untimely" engineer pay demands, meaning the campaign of rolling strikes will likely drag on beyond the current two day stoppage.
"We have what I regard as a very sophisticated and fair wages policy. We are not going to change it now," Dixon said.
Cousins said up to 15 Qantas managers from around Australia, all former engineers, had also worked on Melbourne aircraft as local staff joined 500 workers striking nationally. The stop-work also disrupted up to eight international flights.
Prime Minister Kevin Rudd told parliament the strike was legal and taking place under national work laws.
The latest stoppage follows a two-day disruption last month that grounded 17 Qantas flights.
To bring down costs, Qantas has announced executive wage freezes, job cuts and a reduction in services to Japan.
(Reuters)
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