The national airline’s losses under Alan Joyce are approaching an eye-watering $3 billion amid self-administered engineering and pilot crises. But win or lose, the chief executive is always flying high, writes Michael Sainsbury.
Qantas has posted a loss of $860 million for the 2021-22 financial year bringing total losses under the reign of chief executive Alan Joyce to nearly $3 billion since the 2009 financial year.
In the same period he has been given a salary of $104 million plus this year’s (yet to be announced) salary, including a ‘‘deferred bonus’’ of $3.7 million.
That is despite billions of public funds propping up the carrier during the pandemic, not to mention the sale of assets such as domestic terminals, large tracts of land at Mascot in Sydney, and piecemeal outsourcing of major divisions such as baggage and shifting mission critical heavy maintenance offshore.
Adding insult to staff and customer injury, Qantas announced a $400m buy-back of its own shares this morning, sending its stock 9% higher. This despite the thumping losses and the $2bn plus in public subsidies since the pandemic began. All this begs the obvious question, as the famous Qantas brand has been brought to its knees, there is no profit in it and the public is keeping it afloat … what was the point of privatising the national airline in the first place?
“He hasn’t made a cent,” Australian Licensed Aircraft Engineers’ Association federal secretary Steve Purvinas told MWM.
“My local hamburger shop has made more money than Qantas has under Alan Joyce for the last 15 years.”
The accumulated losses ensure that the company won’t be paying tax any time soon despite it pocketing taxpayer billions. Joyce has forecast a return to profit as early as next year.
Joyce is spoiling for a fight with unions (pity about Qantas customers)
Last Sunday Joyce made another stumble with the announcement of clumsy $50 “sorry” payments and other perks to the company’s top customers. The customer bribes follow the recent $5000 offer to each staff member – provided they sign up to new enterprise bargaining agreements that effectively cut their pay by 10-15% over five years.
It’s worth noting that airlines, constantly in the public spotlight, are notoriously difficult to run. Successful models have generally relied on state backing and/or monopoly or oligopoly positions. Qantas has been fortunate enough to have all of the above.
Misreading the pandemic
This latest limp attempt at mollifying the airline’s angry customers has drawn widespread and understandable ire but has failed to disguise the fact that Joyce, and the company’s board, badly misread the pandemic.
As the pandemic took hold, senior management were convinced that Qantas would not be flying at full tilt until mid 2023, company sources have said. As the company’s engineers begin what is expected to be a pitched industrial battle with the airline’s hyper-busy chair Richard Goyder, his board and chief executive with one-minute stoppages, Joyce has been sugarcoating the latest $1.3 billion loss to the market.
Joyce, whose history of aggressive cuts to pay, conditions and staff – along with well-documented outsourcing – appears to have seen Covid-19 as the perfect storm. Under the cover of a fleet grounded by the pandemic, slashed millions off staff costs and increased outsourcing to improve his bottom line. This short-term approach worked for him, at least.
But the vicious sacking program was carried out in extreme haste and customers are paying a hefty price.
The Federal Court found 2000 of these dismissals to be illegal, a decision now the subject of a Qantas High Court appeal.
Drop the pilot …
Qantas management made serious mistakes in getting rid of the wrong pilots as it handed out 240 voluntary redundancies and early retirement at an estimated cost of between $70 million and $80 million.
For instance it let go of pilots of the newer 787 aircraft, while hanging on to those who can fly the discontinued 747s. The company confidentially told pilots it had a “long term pilot surplus”, in July 2020 redundancy letters seen by MWM.
Qantas pilots past and present have told MWM that the airline told them that it had sufficient pilots on its books until June 2023. A number of early retirement cases ended in court action due to age discrimination, costing the company millions in legal fees and more in undisclosed payouts.
Joyce is now playing catch-up with a major pilot recruitment program. It is understood that the company has employed about 200 of a target of 350 from rivals with many Australian pilots, led by Hong Kong’s Cathay Pacific and the Gulf airlines.
There are persistent rumours circulating around the company that Joyce is looking at “wet” or “damp” leasing – planes that come with full crew or just flight deck crew respectively – a number of 787s from troubled European airline Norwegian.
Flying hours driving people into the ground
Qantas also continued its practice of steadily increasing pilots’ flying hours to the point where more are taking sick leave, company sources said.
Indeed, Joyce has admitted as much, appearing to try to blame the pandemic on a 50% rise in sick leave that has contributed to on-time and baggage woes, when Qantas staff in various divisions told MWM that sick leave was also increasing due to deteriorating conditions forced by management.
“Joyce seems to think that people will just keep showing up through thick and thin because they get to work at Qantas but people also have their lives to live and the costs are now outweighing the benefits,” was a typical staff comment.
If pilot rosters are extremely tight at Qantas – and sick leave increasing – it is put in the shade by the engineering division where offshore outsourcing and running down of local engineering capabilities is coming back to bite the company – and its customers – just as viciously.
A Qantas engineer with decades of experience said:
I have seen many ups and downs with this company, but at the moment we are below rock bottom.
“Part of the problem with delayed flights and now a reduction in flights is not due to fuel or passenger numbers, we are sure it is due to engineering being cut back so far that we are struggling on a day-to-day basis to acquit all of the work that is put before us,’’ the engineer added.
“Rather than admit fault and tell the world that they cut too deep they blame other factors. Qantas engineering has not had any recruitment in reasonable numbers in over 10 years. Yet in that time I would say approx 1000 engineers company wide have been made redundant or retired. It is this sort of information that isn’t really being shared in the public domain.”
Engineering challenges
In the past decade the Qantas system has been streamlined and extra training has occurred to allow cross-training among specialist engineers that are divided into mechanical and avionics as well as licensed (senior engineers needed to sign off on work) and unlicensed.
Licensed aircraft maintenance engineers [LAME] can certify for about 70-80% of work outside their specialty on an aircraft. More complex work is still needed to be carried out by fully qualified specialist engineers.
“This system works for the most part, but as we haven’t trained any full avionics licensed engineers for years there are shifts where we don’t have a suitably qualified Avionic LAME available,” the engineer said. ”The result will be deferred work or the aircraft grounded until that LAME is available.”
The engineer outlined a couple of examples of the multiple engineering problems that Qantas faces regularly.
As rival Emirates splashes more than $US2 billion to enhance its in-flight customer experience, retrofitting over 120 aircraft with fresh interiors, and service improvements across all cabins starting this year, Qantas is stuck with planes that have lucrative seats in first and business class out of service due to serial engineering problems. Qantas carries out the heavy maintenance on A380s and 787s, where the aircraft undergoes two to four months of inspections and repairs offshore at various locations including LA, the UAE, Singapore and Manila.
“An A330 came back from heavy maintenance in Hong Kong recently with over 20 defects, some quite significant, on arrival in Sydney. This means that the engineers in Sydney, who are already stretched, need to look into all these defects before it can fly again. Qantas pays good money for substandard quality at these outsourced facilities,” the engineer said.
Qantas has only three of its eight A380 super jumbo aircraft flying and is hoping to get one more back in the air by the end of the year. Each A380 has 14 first-class seats. These seats were overhauled at a heavy check for one of the A380s earlier this year in the United Arab Emirates.
Flying by the seat of their pants
“These seats have been nothing but trouble ever since. This aircraft has four of its 14 seats locked out, unable to be sold for passengers to occupy. The first-class seats weren’t replaced, they were reworked, modified and put back in but the work was very second class. Hence now months later we are still trying to fix them. This equates to approx $15,000-$20,000 per seat per flight in lost revenue. Engineering does not have the resources or time to spend fixing these seats as they are complex and take time to repair. Every time the aircraft comes to Sydney they ask to fix them but we don’t as we don’t have time or parts to do it. These four seats have been locked out for weeks now. This would not happen with Singapore or Emirates. This is the joke of an airline that Qantas has become.
“We would not be surprised if Alan was to get rid of engineering altogether and farm it out to the lowest bidder, much like he did with catering, baggage and now the new simulator building. If that was to happen the place would well and truly fall apart. The idiots running the place are unaware of all the extra bits engineers do to make the place run. A third-party provider does not do that, as we see daily with DNATA and Swissport [Qantas’ outsourced baggage handlers].”
A key problem is the lack of aircraft engineers in Australia – and indeed much of the world. Qantas wound down its major apprenticeships program soon after Joyce stepped in and now has only a small program that runs in Brisbane.
This is yet another example of how successive governments have failed to require better conduct from the Australian airline market’s 800-pound gorilla. Other examples are the lack of specific airline regulation and customer guarantees.
Despite this, Qantas is only offering its engineers the company-wide pay offer of 1.5% each year for 2020-2020, or 2% each year following the Covid pay freeze.
“We will start one-minute stoppages on August 25 as we have to start this month,” union official Steve Purvinas told MWM.
These are designed to bring management back to the table. If they do not then we can escalate at any time at all
Purvinas agreed that the quality of offshore maintenance has deteriorated: “For instance the Los Angeles engineering workforce has been decimated. All of the stuff has been pitched by other airlines who pay more. But because Qantas has decided to offshore that work, they aren’t equipped to bring it home. So they’ve got no choice and facilities to try and repair their aircraft. And of course when you use on demand facilities things get missed and safety issues arise.”
Still, Joyce retains the strong backing of the board – which contains only one member with any airline experience.
Rooing the day: Qantas passengers and crew taken for a ride by the board
“Difficult decisions were made that have proven to be the right ones, especially given the lockdowns and border closures that are still having a massive impact,” chairman Richard Goyder said in the 2021 annual report, which also revealed Qantas directors upping their own pay.
This comment raises many questions about what, exactly, they are told – and whether they are asking Joyce and his team the right questions.
But in the usual Qantas way, Joyce is celebrating his fifth chunky loss in 14 years at the top with a share buyback and commentary designed to gee up the share price – and executive bonuses.
“We’ve seen the business market get back to where it was pre-Covid, the small business market is ahead of where it was pre-Covid and the leisure market is building internationally as well as domestic,” he said.
Michael Sainsbury is a former China correspondent who has lived and worked across North, Southeast and South Asia for 11 years. Now based in regional Australia, he has more than 25 years’ experience writing about business, politics and human rights in Australia and the Indo-Pacific. He has worked for News Corp, Fairfax, Nikkei and a range of independent media outlets and has won multiple awards in Australia and Asia for his reporting. He is a fierce believer in the importance of independent media.