Australian flag carrier Qantas said Monday (30 November) that it was outsourcing ground handling operations at 10 airports across the country and will rid itself of another 2,000 employees as it works to survive the COVID-19 pandemic. The company will outsource the work to several companies including international operators Menzies and Swissport.
In August, the airline announced its plan to outsource ground handling operations, which includes baggage handling and aircraft cleaning, and started considering bids from specialist ground handlers and in-house bids from employees and their representatives. The airline’s goals in outsourcing the work were to save about A$100 million annually, based on pre-COVID levels of flying, through the use of third-party providers as well as avoid spending on ground handling equipment such as aircraft tugs and baggage loaders which could save A$80 million over five years.
Qantas said Australia’s Transport Workers Union (TWU) submitted a bid on behalf of employees in accordance with terms in the enterprise agreement. Teams from some individual airports submitted local proposals. “Unfortunately, none of these bids met the objectives”, the airline said.
The airline said the in-house bid from TWI workers “was, by their own admission, ‘theoretical’ with no roadmap of how projected cost savings would be achieved” and it was rejected. “While proposals from employees at various ports did include detailed plans that would save around A$18 million, there remained a significant gap compared to what was offered by third party providers,” Qantas said Monday.
Qantas said a number of external bidders, some of whom already provide these services at 55 airports across Australia, were able to meet all of the objectives, including reducing annual costs by approximately A$103 million. The preferred bidders are being notified and, subject to consultation and finalising contract terms, the transition is intended to occur in the first quarter of 2021. Qantas affiliate Jetstar has already transitioned its ground handling operations at six airports to external suppliers.
Qantas said in its statement announcing the change that it follows a A$2.7 billion statutory loss for the group in FY20 due to COVID-19 and associated border restrictions. Further significant losses are projected in FY21 due to a drop of revenue in excess of A$10 billion. Since the beginning of the pandemic, the Qantas group has taken on in excess of A$1.5 billion in additional debt.
The company also said with the announcement Monday, job losses across the group are at 8,500 of its 29,000 pre-COVID workforce.
Qantas Domestic and International 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. 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.”
Qantas has selected new preferred suppliers for the baggage handling contracts, most of which are big international companies that had already been chosen for its Jetstar operations: Edinburgh-headquartered Menzies Aviation; Zurich-headquartered Swissport (which is owned by China’s HNA Group); and Dubai-headquartered Dnata (owned by the Emirates Group), according to media reports in Australia. It has named Queensland-based Oceania for its Adelaide operations and Perth-headquartered Northwest Aviation Services for its Alice Springs operations, and tipped national operator Cabin Services Australia and NSW’s Star Aviation to pick up its cleaning contracts.
Transport Workers’ Union (TWU) national secretary Michael Kaine lambasted the job losses, claiming the union had put in the “most competitive” bid to keep the 20 contracts up for grabs, according to Australian media. The union would examine “every legal option” to fight the decision, Kaine said. The TWU, which has previously raised concerns about safety incidents at Swissport, argued that jobs were being outsourced to “substandard operators” instead of being done by “Qantas specialists”. Kaine called on the federal government – which has given Qantas some A$800 million in employment payments and subsidies to keep planes in the air – to step in and stop the job losses. “There is no excuse on the basis of COVID for outsourcing this work,” Kaine said.