- Industrial action triggered by wage and benefit claims of up to 15 per cent
- Jetstar cutting 10 per cent of domestic flights in January to avoid disrupting customers at short notice
- Financial impact estimated at approximately $20-25 million
Jetstar continues to work through its contingency plans to manage industrial action brought by the Australian Federation of Air Pilots (AFAP) and Transport Workers Union (TWU). Both unions are pursuing wage claims that are unsustainable, inconsistent with the three percent increases offered across the Qantas Group and ultimately incompatible for a low fares airline.
Jetstar employs approximately 830 pilots and 375 ground crew in Australia.
Extensive contingency exists for TWU action, including the use of third party suppliers for tasks such as loading bags and operating tugs.
Some contingency exists for AFAP action, such as consolidating flights and transferring passengers on to other airlines (including Qantas) where feasible. The AFAP has indicated it does not intend to take action between 20 December 2019 and 3 January 2020.
IMPACT OF INDUSTRIAL ACTION
Due to the potential for ongoing action by the AFAP in particular, Jetstar is proactively adjusting its schedule for the rest of January by reducing domestic capacity by about 10 per cent.
Doing this well in advance will significantly reduce disruption in what is the airline’s busiest month of the year, compared to the three to five working days notice the union is required to give of any industrial action. Customers already booked on these flights will be contacted in coming days to be offered alternatives, including full refunds.
The earnings impact of these January cancellations, in addition to disruption in December, is estimated to be approximately $20 - $25 million.
Jetstar CEO Gareth Evans said: “Industrial action doesn’t change the fact the wage claims being made by the TWU and AFAP are unsustainable. In the case of the pilots, the union is asking for what amounts to a 15 per cent wage increase in the first year in a group where captains earn more than $300,000 a year. For some groups, their salaries would increase by $60,000. We can’t agree to that.
“The TWU’s claims equate to a 12 per cent increase in costs for Jetstar ground crew who earn around $70,000 per year on a part time basis and around $90,000 per year on a full time basis. This is despite the same union agreeing to a three per cent wages deal in other parts of the Qantas Group.
“There’s no doubt that industrial action is expensive and frustrating, but we have to hold the line on costs or it threatens the long term sustainability of our business. We apologise to the customers whose plans have been caught up in what the unions are doing.”
NETWORK AND FLEET REVIEW
As part of its contingency planning, Jetstar has undertaken a review of its fleet and network to protect the airline’s ongoing profitability.
This review has identified three 787-8 aircraft operated by Jetstar that are serving loss making and marginal international routes. A business case has been developed to sell these three aircraft, with capital to be reinvested in other parts of the Qantas Group or returned to shareholders. A final decision is expected to be made in the first quarter of calendar 2020.