Qantas delivers the stings in the tail

Qantas CEO Geoff Dixon announced yesterday Qantas aircraft maintenance would not be sent offshore.

The announcement though came with a couple of nasty stings in its tail.

The positive news by Mr Dixon was couched in terms of, “the review would initially see Qantas invest in, and retain, its wide body heavy maintenance facilities in Australia”.

The first sting in the tail began very soon afterwards, with him adding, “a longer term commitment to retaining the operations in Australia will depend on Qantas achieving competitive benchmarks with the larger global Maintenance Repair and Overhaul providers (MROs) now dominating world aviation”.

This clearly indicated that offshoring its maintenance was still very much on the agenda and this was confirmed to The Mole by Qantas spokesperson Simon Rushton yesterday afternoon.

Mr Dixon added, “Retaining three wide body maintenance facilities in Australia is no longer viable under this scenario”.  “We have one chance to make this work and we are determined to succeed and that Qantas had to be competitive in every area in which it invested as the company moved towards a cost base that could ensure profitable operations with an oil price above US$60 a barrel”.

The second sting came when Mr Dixon announced, “480 jobs will be lost in Sydney through the closure of the Sydney maintenance base”.   He added, “however, through re-deployment the number of people who leave the company as a result of this decision could reduce to around 340.”

Mr Dixon said the review at Qantas Engineering resulted in:  

§         Heavy maintenance for Qantas’ Boeing 747 fleet transferred from Sydney to the airline’s base in Avalon, Victoria, with an increase in employment opportunities at Avalon;

§         Heavy maintenance for the B767 fleet continue at the airline’s new purpose-built facility in Brisbane, also with increased employment opportunities;

§         A review over the next six months of the airline’s narrow body aircraft heavy maintenance operations, currently carried out at Tullamarine in Melbourne;

§         An investment of around $50 million in infrastructure and technology to facilitate the restructuring;

§         Qantas Engineering seeking third-party work within the region when the restructuring was complete; and

§         A commitment to retain a comprehensive apprentice program for the training of future aviation engineers in Australia.

Mr Dixon said, “the decision to close the airline’s Sydney heavy maintenance base, after more than 55 years of operation, was regretted, but necessary”, adding, “we have severe space limitations at Sydney and the limitations will increase in future years”.  “Qantas would have had to vacate the current Sydney maintenance base by 2009, or 2010 at the latest, even if the Sydney base had provided the most efficient outcome for Qantas”.

The overseas option being still on the agenda was confirmed by the following comments by Mr Dixon when he added, “there will be in-depth reviews in June 2007 and June 2008 and if we do not achieve the required targets and cost structure we will look at other alternatives,” and “Qantas could not commit at this stage to carrying out at its own facilities the heavy maintenance on its A330 and its new B787 aircraft due into service in 2008.

Qantas confirmed that the Sydney Heavy Maintenance operation will start winding down immediately, close on 31 May 2006 and all Boeing 747 work will be transferred to Avalon by this date and that it is unlikely that A380 heavy maintenance will be undertaken in Australia.

Report by The Mole