The company hopes to achieve savings of approximately $100 million annually, as well as $80 million in expenditures over five years for ground support equipment (GSE) such as aircraft tugs and baggage loaders.
On Monday (November 30, 2020), Qantas announced an update on their proposed outsourcing of ground handling services at Australian Airports. The carrier has decided that they will outsource ground handling at 10 airports and have notified approximately 2,000 employees who will be impacted. Qantas announced the restructuring of ground handling operations last August including baggage handling and aircraft cleaning. At that time, the company started a review of third-party specialist ground handlers as well as in-house bids from employees and their unions. The bids were required to reduce the overall cost of approximately $100 million and avoid around $80 million over five years in CAPEX spending on GSE equipment such as aircraft tugs and baggage loaders. Although the Transport Workers Union (TWU) and some airports submitted proposals, none of the bids met the perquisite criteria. In Monday’s announcement, Qantas Domestic and International’s CEO, Andrew David, said,
“This is another tough day for Qantas, particularly for our ground handling teams and their families. We thank every one of them for their professionalism and contribution over the years supporting our customers and operations. Unfortunately, COVID has turned aviation upside down. Airlines around the world are having to make dramatic decisions in order to survive and the damage will take years to repair. While there has been some good news recently with domestic borders, international travel isn’t expected to return to pre-COVID levels until at least 2024. We have a massive job ahead of us to repay debt and we know our competitors are aggressively cutting costs to emerge leaner.
“The TWU’s in-house bid claimed that significant savings could be made but it failed to outline sufficient practical detail on how this might be achieved, despite us requesting this information multiple times throughout the process. Even with the involvement of a large accounting firm, the bid falls well short of what the specialist external providers were able to come up with. We have used these specialist ground handlers at many Australian airports for decades and they’ve proven they can deliver a safe and reliable service more efficiently than it’s currently done in-house. This isn’t a reflection on our people, but it is a reflection of economies of scale and the urgent need we have because of COVID to unlock these efficiencies.”
Several external specialist ground handling bidders were able to achieve the company’s objectives, including annual savings of $103 million. The preferred bidders will be notified today and pending contract finalization, Qantas will implement the transition in the first quarter of 2021. Jetstar has already transitioned ground handling to external suppliers at six airports.
Impacted employees will be entitled to a redundancy package and support for transitioning to a new job outside the business. There may also be some opportunities with third-party providers as demand for air travel gradually recovers.
Last August, Qantas also announced a proposal to outsource crew bus services in Sydney, potentially affecting 50 employees, and that review is expected to be completed by the end of the year. With today’s announcement, the pandemic-related job losses across the Qantas Group expands to 8,500 out of their 29,000 pre-pandemic workforce. The Group reported a $2.7 billion statutory loss in FY20, due to COVID-19 and the related border closures, and the carrier projects substantial losses in FY21. Since the start of the pandemic, Qantas has taken on an additional $1.5 billion in debt.
Source: Qantas