QF's' Future Plans: less kangaroo, more Star

-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA1


http://www.theage.com.au/news/busine...page=fullpage#

85 and still a rising (Jet)star

November 15, 2005


It still calls Australia home . for now. But the Flying Kangaroo has
bigger ambitions.

THEY'LL all be there for the 85th birthday bash at Brisbane Airport
tonight. The chief executive, Geoff Dixon, the chairman, Margaret
Jackson. Even Prime Minister John Howard and Airbus chief executive
Gustav Humbert will make an appearance, rubbing shoulders with John
Travolta, Qantas' ambassador at large.

A spanking new Airbus A380 superjumbo has been flown out from Toulouse
to do the rounds.

Eighty-five years ago Qantas began as Queensland and Northern Territory
Aerial Services, a tiny outfit based in Longreach, central Queensland.

Now Qantas is set to catapault itself into the global arena and become
a dominant force on the international stage. And these plans could one
day challenge the airline's motto of "Calling Australia Home".

Qantas is evaluating plans to shift thousands of maintenance jobs
overseas, most likely to Asia. And the Federal Government is
considering scrapping the Qantas Sales Act, thus allowing the airline
to be more than 49 per cent foreign owned.

The Qantas board could also approve plans early next month that will
replace the "most recognised" symbol on the tails of its long-haul
aircraft with a less iconic and more gaudy badge . the orange star.

Qantas' plans to expand its low-cost Jetstar franchise to medium and
long-haul international destinations are set to form a major plank of
the carrier's five-year plan to slash $3 billion a year from its costs.

It is believed the airline expects Jetstar International will be 40 per
cent cheaper to operate than Qantas proper.

Dixon has become notorious for his doomsday predictions about threats
to his airline . which is now as famous for its profitability as its
safety record.

Asked about this reputation, Dixon says: "I just don't even understand
that. What do I say? I say this a tough industry, which it is."

He says the carrier has no choice but to cut costs and jobs: "We,
probably more than any other company, feel the full force of
globalisation, and the truth is, even if we didn't want to change, I
don't think it's any longer an option."

Dixon adds that Qantas' plans to place a $20 billion order for aircraft
next month shows the airline is interested in growth, and growing jobs.

The unions are worried, however. Dixon has not only endorsed the Howard
Government's new industrial relations laws but has refused to rule out
shifting more jobs overseas.

But he denies he is only focused on cutting jobs, noting Qantas has
10,000 more employees than 10 years ago.

"There will be job losses, as I've always said, in some areas and job
gains in others," he said. One worry, however, is more jobs will be
created in Qantas' low-cost and lower-paying subsidiary, Jetstar.

In the decade to 2004, Qantas' share of international airline traffic
into and out of Australia has fallen from 40.7 per cent to 29.8 per
cent. Qantas' heavily protected Sydney-Los Angeles route could soon be
opened to Singapore Airlines. Emirates wants to double its air rights
into Australia to 84 flights a week.

Dixon argues it is not competition he is scared of but the uneven
playing field in which he operates. "I don't know of anybody out there
that has to deal with market forces that involves 70 per cent of its
market being owned or subsidised by governments," he says.

The publicly listed Singapore Airlines, often labelled by Qantas as a
government-backed airline, argues it hasn't received a government
handout since the 1960s. Emirates argues it hasn't received a handout
since its foundation in 1985. The Dubai Government-owned airline has
noted how the Australian Government paid off about $700 million of
Qantas' debt in 1992, when the airline absorbed Australian Airlines.

After its successful establishment of a 400-strong Qantas London flight
attendant base, and negotiation of a new union agreement with
Australian Airlines that does not prevent the hiring of foreign crews,
Qantas will test tempers next week when its enterprise bargaining talks
with its maintenance workers start in earnest.

The airline has warned it needs efficiency gains among its 6900 local
maintenance and engineering staff or it will have to look to outsource
the heavy maintenance of its planes overseas. It has already made 200
workers redundant over the past three months.

The Australian Manufacturing Workers Union fears that Qantas wants to
get rid of overtime provisions for maintenance workers, many of whom it
says gross a modest $800 a week. A big concern for the unions will be
the impact on Qantas' safety record. The airline has never had a fatal
jet crash.

AMWU NSW assistant secretary Tim Ayres said: "There's really a strong
national interest issue here."

Ayres says the decision to send maintenance overseas will also be a
decision whether Qantas becomes an "Australian airline or a virtual
Australian airline".

Unions have also noted recent problems encountered with Qantas planes
serviced in Asia.

These include the "low-level" cracks discovered two years ago in the
rear fuselage of two 747s Qantas inherited from Malaysia Airlines.

The cause of the cracks was put down to the sealant between the two
sections of the plane being scratched and partially removed before the
jets were repainted in Qantas colours in Malaysia. Unions also
highlight a corroded beam found in a Qantas 767 several years ago after
it was serviced in Singapore.

But Dixon says safety standards will not be jeopardised. He notes
airlines such as Lufthansa, United, British Airways and soon Air New
Zealand service their planes in Asia.

"They've got engineering excellence and they've been outsourcing parts
of their operations for years," he says.

Citibank analyst Jason Smith estimates Qantas could save up to $100
million a year by outsourcing its heavy maintenance overseas.

Some industry watchers note that the changes (and downsizing) in
Qantas' maintenance workforce reflect the airline's fleet renewal
program. Put simply, newer planes require less time in maintenance.

Dixon has made no secret that Qantas' next growth spurt . Jetstar
International . will be big. The airline's bid to tap into the
fast-growing Asian airline market through its 44 per cent owned Jetstar
Asia based in Singapore is in trouble. But Jetstar Asia's problems have
not dented Dixon's ambitious plans for what will be the first long-haul
low-cost carrier launched by a full-service airline.

"If we start Jetstar International, it won't be just some little add-on
to something. It will be a full-blooded airline," Dixon says. "If we go
with it we're going to go with it very, very aggressively."

The Qantas board is expected to tick off plans for the new low-cost
subsidiary next month and approve a $20 billion order for up to 100
long-haul planes. It is speculated many of the planes will be used for
the new Jetstar.

Unlike Qantas' other low-cost offshoot, Australian Airlines, Qantas
says the Melbourne-based Jetstar International will have fewer
restrictions. It will be able to fly to leisure-based destinations of
its choosing . as long as it doesn't compete on Qantas mainline's key
business routes (such as Sydney to London and Los Angeles).

It is speculated the airline will start operating into destinations
within 10 hours (one sector) of Australia, such as South Korea, Vietnam
and south China. When it builds up enough critical mass it will then
look to destinations farther afield that require two sectors.

"There's nothing off the table, but obviously economics will take some
off the table," Dixon says. Still, the new airline is expected to open
up many routes previously considered uneconomic by Qantas.

The airline's much lower cost base could be partly achieved through
Jetstar's long-haul pilots and cabin crew being paid less per hour and
more seats being crammed on each plane. For instance, Qantas fitted 10
extra seats on its Boeing 717s for the launch of Jetstar domestic in
May 2004.

But aside from making Qantas more profitable, Dixon has hinted at what
he sees as the ultimate prize at the end of the cost-cutting program.
That will be to be on the right side of any future consolidation of the
airline industry.

"This company has never been stronger, and that is true. And I have no
fear for Qantas' long-term viability," he says.

"I have fears that unless we continue to change it won't always be as
profitable. If it's not as profitable it means it's vulnerable to a
predator or it won't be able to invest or grow."

After its successful establishment of a 400-strong Qantas London flight
attendant base, and negotiation of a new union agreement with
Australian Airlines that does not prevent the hiring of foreign crews,
Qantas will test tempers next week when its enterprise bargaining talks
with its maintenance workers start in earnest.

The airline has warned it needs efficiency gains among its 6900 local
maintenance and engineering staff or it will have to look to outsource
the heavy maintenance of its planes overseas. It has already made 200
workers redundant over the past three months.

The Australian Manufacturing Workers Union fears that Qantas wants to
get rid of overtime provisions for maintenance workers, many of whom it
says gross a modest $800 a week. A big concern for the unions will be
the impact on Qantas' safety record. The airline has never had a fatal
jet crash.

AMWU NSW assistant secretary Tim Ayres said: "There's really a strong
national interest issue here."

Ayres says the decision to send maintenance overseas will also be a
decision whether Qantas becomes an "Australian airline or a virtual
Australian airline".

Unions have also noted recent problems encountered with Qantas planes
serviced in Asia.

These include the "low-level" cracks discovered two years ago in the
rear fuselage of two 747s Qantas inherited from Malaysia Airlines.

The cause of the cracks was put down to the sealant between the two
sections of the plane being scratched and partially removed before the
jets were repainted in Qantas colours in Malaysia. Unions also
highlight a corroded beam found in a Qantas 767 several years ago after
it was serviced in Singapore.

But Dixon says safety standards will not be jeopardised. He notes
airlines such as Lufthansa, United, British Airways and soon Air New
Zealand service their planes in Asia.

"They've got engineering excellence and they've been outsourcing parts
of their operations for years," he says.

Citibank analyst Jason Smith estimates Qantas could save up to $100
million a year by outsourcing its heavy maintenance overseas.

Some industry watchers note that the changes (and downsizing) in
Qantas' maintenance workforce reflect the airline's fleet renewal
program. Put simply, newer planes require less time in maintenance.

Dixon has made no secret that Qantas' next growth spurt . Jetstar
International . will be big. The airline's bid to tap into the
fast-growing Asian airline market through its 44 per cent owned Jetstar
Asia based in Singapore is in trouble. But Jetstar Asia's problems have
not dented Dixon's ambitious plans for what will be the first long-haul
low-cost carrier launched by a full-service airline.

"If we start Jetstar International, it won't be just some little add-on
to something. It will be a full-blooded airline," Dixon says. "If we go
with it we're going to go with it very, very aggressively."

The Qantas board is expected to tick off plans for the new low-cost
subsidiary next month and approve a $20 billion order for up to 100
long-haul planes. It is speculated many of the planes will be used for
the new Jetstar.

Unlike Qantas' other low-cost offshoot, Australian Airlines, Qantas
says the Melbourne-based Jetstar International will have fewer
restrictions. It will be able to fly to leisure-based destinations of
its choosing . as long as it doesn't compete on Qantas mainline's key
business routes (such as Sydney to London and Los Angeles).

It is speculated the airline will start operating into destinations
within 10 hours (one sector) of Australia, such as South Korea, Vietnam
and south China. When it builds up enough critical mass it will then
look to destinations farther afield that require two sectors.

"There's nothing off the table, but obviously economics will take some
off the table," Dixon says. Still, the new airline is expected to open
up many routes previously considered uneconomic by Qantas.

The airline's much lower cost base could be partly achieved through
Jetstar's long-haul pilots and cabin crew being paid less per hour and
more seats being crammed on each plane. For instance, Qantas fitted 10
extra seats on its Boeing 717s for the launch of Jetstar domestic in
May 2004.

But aside from making Qantas more profitable, Dixon has hinted at what
he sees as the ultimate prize at the end of the cost-cutting program.
That will be to be on the right side of any future consolidation of the
airline industry.

"This company has never been stronger, and that is true. And I have no
fear for Qantas' long-term viability," he says.

"I have fears that unless we continue to change it won't always be as
profitable. If it's not as profitable it means it's vulnerable to a
predator or it won't be able to invest or grow."

BL.
- --
Brad Littlejohn | Email:
Unix Systems Administrator, |
Web + NewsMaster, BOFH.. Smeghead! | http://www.wizard.com/~tyketto
PGP: 1024D/E319F0BF 6980 AAD6 7329 E9E6 D569 F620 C819 199A E319 F0BF

-----BEGIN PGP SIGNATURE-----
Version: GnuPG v1.4.2 (GNU/Linux)

iD8DBQFDeNenyBkZmuMZ8L8RApXGAKCQrv7KsFEEk3PzOqL+k0 sxp6yZVQCg7kYl
EC3kbkXa4aEnuCIqWtqz+Kc=
=RXF1
-----END PGP SIGNATURE-----