Jetstar to cut January domestic flights by 10 percent

December 16, 2019
Photo: Jetstar

Australian low-cost carrier Jetstar will cancel one in 10 domestic flights in January at an estimated cost of up to $25 million in what it describes as contingency plans aimed at reducing disruptions due to industrial disputes.

In a move that significantly raises the stakes in the strikes, the airline says that doing this well in advance will significantly reduce disruption in its busiest month of the year compared to problems that would be caused by industrial action with just three to five days’ warning.

Customers booked on affected flights will be contacted in the coming days to be offered alternatives, including full refunds.

Project Sunrise: Qantas and pilots still to reach common ground

Jetstar estimated the earnings impact of the January cancelations and disruptions already suffered in December at $A20 million to $A25 million.

Management also revealed it was considering selling three of the airline’s widebody Boeing 787-8 aircraft as a part of contingency plans to protect ongoing profitability.

The airline faces continuing but separate industrial action by the Australian Federation of Air Pilots and Transport Workers’ Union over wages and conditions.

Pilots are taking low-level action this week but have said they will not walk off the job during the busy Christmas period. Ground workers plan to strike again on December 19.

Neither side appears to be budging at this point with Jetstar continuing to describe the wage claims as unsustainable and inconsistent with the 3 percent increases offered across the Qantas Group.

Jetstar chief executive Gareth Evans reiterated his claim that the pilots were asking for what amounts to a 15 percent wage rise in the first year, adding $A60,000 to some salaries. The AFAP disputes the figure.

“We can’t agree to that,” Evans said.

“The TWU’s claims equate to a 12 percent 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 percent 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 apologize to the customers whose plans have been caught up in what the unions are doing.”

However, the TWU said the average guaranteed pay of a baggage and ramp worker was $A650 per week and the pay dispute could be fixed by paying ground workers an additional  90 cents per hour.

“We are appalled that rather than even discussing what their offer is Jetstar are pulling the plug on passengers’ holiday plans,” TWU national secretary Michael Kaine said.

“They are trying to strong-arm and bully their way into forcing low paid workers to continue enduring poverty wages. We don’t want to see disruption and we want to negotiate.

“With the money Jetstar is spending on canceling flights and upsetting holiday plans it could have solved this issue by now.”

The Australian Federation of Air Pilots urged the company to resume talks and noted it was highly convenient for management to blame pilots for work stoppages in January when no action had been planned beyond December 20.

AFAP executive director Simon Lutton said the pilots remained “ready, willing and able to resume negotiations at any time”.

“Our aim is to reach a fair and reasonable agreement,” he said. “It is important that Jetstar returns to the bargaining table to reach a resolution.”

Lutton again vented his frustration at the figures the company was providing about pilot remuneration and the 15 percent salary increase, labeling them as “simply untrue”.

“The AFAP wage claim is for 3 percent annual increases to salary in line with Qantas Group policy,” he said.

“Put simply, Jetstar have manufactured the alleged 15 percent increase based on inaccurate and flawed costings of our non-salary claims, such as those claims relating to rostering and fatigue mitigation.”

The airline said a network and fleet review had identified three 787-8 aircraft operating on 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,” it said. “A final decision is expected to be made in the first quarter of calendar 2020.”

It is understood the review is mainly a result of changes in international demand on routes such as Hawaii but the ongoing uncertainty caused by the industrial action was a factor in the timing.