Thousands of Qantas Group (ASX: QAN) ground operations staff face an uncertain future after the airline announced a review to outsource their jobs and save $100 million.
The latest cost-cutting measure could potentially impact 2,500 baggage handler, aircraft cleaning and ground transport jobs for the airline and its subsidiary Jetstar, on top of the 6,000 redundancies already announced in June.
In an announcement today the company said the COVID-19 crisis had forced management to examine whether these services could be delivered more efficiently.
Some Qantas management roles could also be in the firing line, but customer-facing team members at airports are not under the scope of the reviews.
Staff and unions have been informed of the decision, with the review set to be undertaken over the coming months.
Qantas Domestic CEO Andrew David, who will soon lead on the airline's international business as well after the departure of its CEO Tino La Spina, emphasises airlines have to change how they operate to ensure they can survive long-term.
"We've already taken drastic action, with more than 220 aircraft grounded, the vast majority of our workforce stood down and assets mortgaged to raise cash," says David.
"Right now, our domestic capacity is at 20 per cent of pre-COVID levels and international travel is expected to take years to recover.
"We know travel restrictions will lift eventually, but the market will be very different. Every airline will come through this much leaner and more efficient, and we have to be able to compete if we're going to survive."
David estimates outsourcing work to specialist ground handlers would save an estimated $100 million in operating costs each year.
To help it get through this period as one of Australia's most heavily impacted companies from the pandemic, Qantas received $267 million in JobKeeper payments from the Federal Government to support its staff by 30 June.
This was part of a total gross benefit from government support of $515 million, but the net benefit of government payments after the costs of operating flights was $15 million.
"Today's announcement will be very tough for our hard-working teams, most of whom have already been stood down for months without work," says David.
"This obviously adds to the uncertainty but this is the unfortunate reality of what COVID-19 has done to our industry."
David's sentiments were echoed by Jetstar Group CEO Gareth Evans.
"We realise this decision will be extremely difficult news for our ground handling team and their families at what is already a very challenging time," he says.
"But unfortunately this ongoing crisis means we have to make some really tough decisions which impact our team members who have provided a consistent and professional operation over many years.
"Every major airline around the world uses these specialist providers to support their operations. These ground handlers provide these services to many airlines at airports, rather than just one, and provide scalable resources, which makes them very cost effective."
He says contracting this work out also reduces the capital spend required each year.
"As an example, Qantas and Jetstar would need to invest a further $100 million on ground handling equipment over the next five years, such as tugs and bag loaders, if the work is kept inhouse," he says.
"The Qantas Group sets the safety standards through our safety management system whether work is done in house or external suppliers. We expect some unions will come out and say these suppliers are unsafe, despite the fact they are used by every other airline in this country.
"We would never compromise on safety. We've already worked with some of these suppliers for decades and we know their track record on safety is consistent with work done in house."
The changes are proposed for Qantas staff at airports in Adelaide, Alice Springs, Brisbane, Cairns, Canberra, Darwin, Melbourne, Perth, Sydney and Townsville, as well as Jetstar staff in Adelaide, Avalon, Brisbane, Cairns, Melbourne and Sydney Domestic.
Qantas will also look to outsource its bus services for customers and employees in and around Sydney Airport, as part of a similar but separate review.
Qantas Group says affected employees will be provided a redundancy package and be provided with support to transition to new jobs outside the business.
On its Ground Operations careers page, Qantas reports it has 7,000 people currently working in its airport terminals around Australia.
Updated at 2:14pm AEST on 25 August 2020.
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