Qantas faces stormy weather ahead

Standard & Poor’s downward assessment for the overall outlook for Qantas in 2009 reflects the negative impact that ongoing high fuel prices (and the likelihood that they will remain high for a good while yet) continue to have on the carrier.

It is not ideal for Qantas to have the cash flowing out of the business at a greater rate than cash flowing in. This inevitably means cost-cutting exercises, with customers most likely facing further fuel surcharges and fare increases over the coming weeks.

Already Qantas routes have been abandoned, such as the Gold Coast to Sydney route (however Jetstar still flys numerous services to the Gold Coast, so the pain has been mitigated to a degree on this particular route), and services most likely will be cut on many other routes in order to ensure higher passenger numbers per individual flight.

The Aircraft Engineers pay dispute adds to the current mix of headaches for CEO Geoff Dixon, at a time when potentially hundreds of jobs will need to be cut across the airline.

Going off on a tangent, well OK then – on to a soap-box (its what Moles do!), it is interesting to note that Qantas employees must now be pretty close to joining other major brand-name employees in the ‘What staff benefits?! And they pay me how much?!” club.

Following is a personal rant, so hopefully the Molefather will not be aggrieved!

Once upon a time, a key influencer for people joining large organisations (and let’s be honest here) was simply the perks! The better the perk, the more likely people were to retain motivation, be more agreeable to cost cutting exercises and generally be of good disposition towards customers & colleagues! (OK, maybe not all the time…)

Yes, this can be viewed as an over-simplistic assessment, but not so long ago people would join banks as tellers for the cheap interest rates on mortgages, or retailers for cheap goods, or the corporate world for, travel, entertainment and fine dining! Mostly, you also had to deliver, yourself, or you were out.

Enter FBT. The perks were now going to cost, so gradually these have all been phased out.  Human nature always responds in the end – pay the minimum, offer no perks in a sea of rising costs and what happens to the once happy employee and their impact on  customers?

Banks provide a good example of the results of such policy (Some bank bashing on a Friday feels so gooood!). One day, a consultant will most likely be paid a million dollars to arrive at a simple understanding..  A teller is paid on average 30 – 40k per annum. For the majority of bank employees, the only discount offered on a loan interest rate is the same as can be offered to any member of the public.  The result is obvious.

Yes you can provide a lesser salary, but you can only do this if the perks are real, not fluffy no-real-value staff benefits. Just pay the FBT – yes costs will increase initially, but watch what happens longer term as a result. It nearly always comes down to “Show me the money!” (or a fabulous perk!)

What has this all got to do with Qantas you ask?! Like many, it is easy to believe that if someone works for Qantas it is happy days – as their core business is… flying people to numerous places on the planet! The reality appears to be closer to the bank model.

Flight costs are not that heavily discounted, and with so many cheap fares around, staff often find it cheaper to fly using other airlines.  It is not uncommon for staff to fly (and actually pay more than the staff discount price on offer) with other airlines to avoid hassle and frustration.  Funnily enough, people like to actually board the plane that they have booked and like to reach their destination when scheduled.

Qantas staff ‘leisure’ travel is standby.  This means families book time off work, organise kids, dogs and everything else, then turn up at the airport. Guess what happens next? A high potential for long hours of waiting, even being told to come back tomorrow… Or, even worse, a stranding in Singapore or another port mid-journey, the only option being to buy a full commercial ticket to come home.

Without turning this into a ‘pity the poor Qantas employee’ act; reduced Qantas routes and services and engineer strikes will impact staff as much as the public. It means even a lesser probability of staff being able to board a plane as planned and flying off into the wild blue yonder.  Experiencing a horror holiday journey, arriving back at work to find some colleagues gone (but not their work) and then being told that although the performance review says “you’re the best”, there will be no salary increases this year has the potential to create even more problems for the Aussie carrier.

It may not rank as highly as upwardly mobile oil prices, but times this employee frustration & personal cost by a few thousand people (many customer-facing) and the impact surely must eventually be felt all the way to the monetary bottom-line.

Yes, all will have to accept the pain until outgoings reduce, and the above scenario may well occur more regularly in the coming months, however, it does highlight the fact that additional non-monetary impacts may need greater consideration within the airline industry as oil prices go up, up and away.

But for the moment it is still all about the money! Yesterday, Qantas Flight Engineers stopped work after negotiations over pay broke down.  Geoff Dixon said fuel prices had doubled over the last twelve months and that it was not economically possible to meet the Engineer’s pay demands.

Mr Dixon is refusing to consider further negotiations and further strikes are expected.  Delays to flights are already being felt, and the stalemate is not good news for Qantas customers.

Last night a meeting was held by Aircraft engineers in Brisbane, with Qantas saying that only one Brisbane to Sydney flight was cancelled, with passengers being placed on other flights.

Meanwhile, Qantas employees are wondering where the job axe is going to fall….

by The Mole