Qantas unions seek meeting

A report by Stuart Washington in the Sydney Morning Herald today says that
Qantas unions are seeking assurances about the security of more than $600 million in workers’ entitlements after the full extent of the debt burden facing the “new” Qantas was revealed last week.

In a letter sent by the ACTU on Friday, the 11 unions are seeking a meeting to gain details from the likely new owners about the airlines’ plans for asset sales, leaseback arrangements and possible deals to leave joint ventures, and the likely impact these changes will have on Qantas workers.

The call was prompted by last week’s announcement that the Qantas bidder, Airline Partners Australia, planned to pay itself $4 billion from the airline in the first year of ownership, almost doubling Qantas debt levels to about 4.3 times earnings.

A telephone hook-up involving the unions on Friday focused on ways in which workers’ entitlements could be effectively protected if the company moved to these debt levels to make the capital payments.

ACTU senior industrial officer Richard Watts said yesterday, “They talk about patient capital. It’s about as patient as a rabbit at a greyhound track”.

Mr Watts said yesterday negotiations to protect workers’ entitlements in the event things went “pear shaped” could include Qantas taking out some form of insurance or Qantas giving workers security over certain airline assets, with Qantas’s 2006 annual report showing workers’ entitlements for annual leave and long service leave of $678 million, although the true figure is likely to be much greater.

Mr Watts added, “It’s not something we have raised with Qantas with any great vigour in the past because it’s a profitable, well-run airline but now it’s certainly in the forefront of everyone’s minds”.

Ansett collapsed in 2001, owing workers $760 million in entitlements and to date all but $100 million of these entitlements have been paid, partly because most creditors were unsecured and had no call on the airline’s assets.

ACTU president Sharan Burrow said yesterday, “What’s happened is it has become clearer that the profit that the Airline Partners seeks as a result of their investment will simply create a greater debt for Qantas and, in the process, put pressure, of course, back on the jobs of working Australians.”

“The retention of Qantas as an Australian icon is now seriously threatened, given you have got a board and management who seem to care less for Australian jobs, and with debt levels that are probably not sustainable.”

The size of the drawdowns for Airline Partners Australia surprised the market last Thursday, showing the new owners intended to draw down $1.5 billion in Qantas’s retained earnings and $2.5 billion from a “capital management” program in the first year, with the size of the drawdowns were only released because key fund managers had refused to support the privatisation proposal, forcing APA to revise its bid to 70% acceptance from shareholders.

The upshot is that Qantas will remain publicly listed, at least until APA issues a second offer and wins over the 90% acceptance level required to compulsorily acquire the airline.

Linda White, the assistant national secretary of the Australian Services Union, said yesterday that unions were conscious of the collapse of Ansett and while not suggesting Qantas would collapse, she said the “new” Qantas was inherently riskier, with loans likely to be secured against assets, adding, “You want to make sure that they are going to get any money that they are entitled to”.

A spokesman for APA was unable to comment yesterday.

A report by The Mole from The Sydney Morning Herald