Qantas Says Strike Costs USD$16 Mln A Week

October 28, 2011

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Australia's Qantas Airways said a protracted union dispute was costing it about AUD$15 million (USD$16 million) a week in lost revenue and has caused a dive in forward bookings ahead of the vital Christmas holiday season, making it unable to give a profit outlook.

Qantas predicted a volatile remainder of the first half of fiscal 2012 as it also faces higher fuel prices and heavy losses at its international operations.

The airline is under growing pressure from staff who have taken strike action since September over pay disputes and its other efforts to cut rising costs.

More than 600 flights have been cancelled so far due to the strike, affecting 70,000 passengers. Australian Associated Press said an additional 10,000 passengers were delayed on Friday as workers went on strike during the annual shareholders' meeting.

Qantas chief executive Alan Joyce said on Friday the industrial unrest had cost the carrier AUD$68 million to date, more than the AUD$49 million cost of the volcanic ash cloud from Chile which disrupted flights for weeks earlier this year.

"It is having a severely detrimental effect on their current position," said White Funds Management portfolio’s Angus Gluskie.

"We want to see a solution whereby a happy outcome is achieved for both the employees and Qantas, but who's to say that fairytale is going to happen?" he said.

Executives faced angry shareholders and workers at the shareholders' meeting, where extra security guards and metal detectors were in evidence.

The strike is the worst dispute the airline has faced since 2008, when industrial action by engineers cost the airline AUD$130 million (USD$133 million), according to local media.

Disruptions have mainly hit domestic flights in Australia where the carrier makes most of its profits, particularly from its low-cost offshoot, Jetstar, and the frequent-flyer programme.

Its chief domestic competitor, Virgin Australia, has capitalised on its larger rival's woes, adding capacity to carry disgruntled Qantas passengers.

Virgin said last week it has added more than 31,000 domestic seats each week over the past three months.

Qantas' international business is losing AUD$200 million a year and is key to the dispute because unions oppose the airline's plan to cut local jobs in favour of expanding in Asia.

Qantas is looking at setting up two new airlines in Asia. It plans to cut 1,000 jobs and order USD$9 billion of new Airbus aircraft as part of a makeover to salvage the international business.

"It means the Asianisation of our airline, it affects our national interests and it affects our commercial interests in this country," said Transport Workers Union spokesman Tony Sheldon outside the shareholders' meeting.

HOSTILE QUESTIONS

A noisy meeting was underway -- already clocking up three hours -- and hostile questions from small shareholders about the company's outsourcing plans and its failure to settle with unions were met with applause, whistles and cheers.

A group of 20 to 30 protesters were outside the meeting site holding placards saying "No job cuts at Qantas" and chanting "Alan Joyce CEO, Workers rights must not go."

The airline has been forced to ground planes and cancel flights as disputes with baggage handlers, ground staff, pilots and engineers look set to drag on until at least Christmas.

Qantas is under pressure to settle the dispute ahead of the critical Christmas and summer holiday season.

CEO Joyce told the meeting that unions wanted to retain "outdated work practices."

"They have created such uncertainty for our customers that we have seen a dive in forward bookings," he said.

Joyce said it would cost the airline more to give into union demands.

"Agreeing to the union's unreasonable demands would have a far greater cost on the company including risking the future of Qantas," Joyce said.

GOVERNMENT INTERVENTION

Joyce said earlier the carrier had not asked Australia's government or Prime Minister Julia Gillard to intervene in the disputes. The government can use powers under the Fair Work Act labour laws to force an end to disputes.

"We haven't, (but) the act is very clear. The prime minister and the government have the ability to intervene, if they so wish, in national interest terms," he told Australian radio.

Gillard has urged both Qantas and the unions to enter more intensive negotiations to end the dispute.

Separately, Qantas chairman Leigh Clifford said the airline believes the limit on foreign ownership of the carrier was neither necessary nor appropriate.

But Clifford told shareholders that there was little appetite on either side of the Australian government to change it.

"It doesn't mean we won't keep trying," to have the cap increased, he said.

(Reuters)