The latest developments in efforts to persuade Qantas to maximize its Australian use of engineering skills go to critical questions for airlines world wide.
It is true, as Qantas management keeps saying, that newer aircraft designs require less intensive skilled manual maintenance work, even though there is a significant migration already underway in airliner maintenance to computer based systems skills.
But the caveat in this, which neither management nor labour seem keen to discuss in detail in public is that the high composite designs like the Boeing 787 and Airbus A350 families require very different skills, techniques and equipment to detect and repair cracks or other damage in these airframes.
The safe and appropriate maintenance of these types is depicted as almost trivial in the brochure descriptions, but the reality seems set to be very different, which isn’t to say they won’t be safe.
But a safe introduction of these ‘plastic fantastic’ airlines will require a significant investment either in multi-airline servicing arrangements with third party facilities, or in-house programs.
Qantas management comes across as favoring the outsourcing of these requirements to what is hoped to be more efficient maintenance, repair and overhaul centres (or MROs in the industry jargon), in which the human and equipment costs of these processes is paid for by a wide range of customers, rather than being an asset tethered to a single fleet.
The problems with this that are emphasised on the maintenance employee side are that such centres, whether in Asia, Europe or Australia, include a loss of control by the airline over the standard of work done and the punctuality with which it is done, and that in a carrier like Qantas, excellence in engineering is inextricably linked to its brand value for safety.
The licensed engineers, who were not high profile supporters of yesterday’s engineering alliance announcement, can point to the mishaps that have befallen the Rolls-Royce RB 211 engines fitted to most of its aged Boeing 747-400s since the airline closed its specialist shop dealing with them three years ago in favor of a Rolls-Royce centre in Hong Kong.
Qantas, Cathay Pacific, and other RB 211 carriers have experienced sharply rising levels of destructive failure in these engines as they age. Rolls-Royce has been rolling out upgrades to overcome these problems, but to a timetable which suited it rather than the carriers, or indeed their respective national safety authorities.
There is a convincing case put by the engineers that the destruction of the world class world leading expertise in RB 211 engines that Qantas willingly dispensed with has placed increased risk over the long range flights that used 747s powered by those engines, and has cost the company money instead of saving it.
When a Rolls-Royce Trent 900 engine on a Qantas A380 disintegrated after departure from Singapore in November 2010, Rolls-Royce knew about a problem with those engines, and was in fact rolling out, in its own sweet time, a solution to those problems, which Qantas CEO Alan Joyce very forcefully said that the airline hadn’t been told about.
But Qantas had outsourced all but line (or day to day) servicing of those engines, in a power and maintenance by the hour deal in which it also lost control over such matters. The timetable to which things were done, and the information that Rolls-Royce was prepared to share with its customer, was its prerogative, not that of Qantas as a customer which had signed them away.
The outsourcing proposition for maintenance is without doubt, a seductive one for airline managements trying to reduce costs and internal complexity.
There is a powerful impetus in most airline managements to see their core business as managing a brand, rather than worrying about flight standards or engineering standards, and the troublesome pilots and rude mechanics that supply them.
For Qantas, it is a process that leads to a repudiation within a company, of values and standards that the customers may associate with the brand, but the company, and its risk managers, might see as the burden of excessive excellence.
The days of tick all boxes, world’s best practice in airline standards as defined by globally harmonized rules, also means downgrading stand out performance to something that by regulation, is exactly the same as the standards applying to all competing airlines.
The unaffordable excellence premium is being hunted down and killed by airline managements everywhere, not just in Qantas.
Automation in flight systems and standarisation in maintenance, rule supreme.
To hell with the slight increase in the risk of a hull loss within 50 years to one within 20 years, is one way of summarizing the general direction of airline economics in these times. Let’s rely on a bit of hand wringing, a lot of media manipulation, and lots of counselors, to overcome anything unsightly involving piles of body bags and hastily painted out airline logos on the wreckage.
If we examine some of the recent claims by Jetstar, the low cost subsidiary that Joyce has on several occasions claimed is subsidizing Qantas, the real future of the company is breaking even on operations and banking the profits from selling muffins to passengers.
It’s a shocking thought, but if muffins and ancillary services in general mean that a Jetstar A320 make a net gain of $20 per passengers, that’s around $3600 per short flight, or over eight sectors between Sydney-Melbourne, that’s a theoretical $28,800 a day per plane, or way more than Qantas is ever going to make per passenger operating full service jets on the same route.
It’s also a somewhat utopian dream on the part of management in the real world of less than full flights and deep losses on promotional fares to maintain market share.
Operating the total apparatus of an A320 fleet to sell muffins at a 75% markup is a bit like using nuclear fission to boil water.
The union push to maximize engineering skills in Australia, including the revival of the third party maintenance and overhaul work Qantas used to profitably perform for other carriers, is admirable, but it requires a focus and a degree of added organisational complexity that Qantas management seems determined to avoid.
15 Comments
Is there a reason why Qantas couldn’t simply cut loose their MRO/Engineering division so that it could form its own stand alone venture? This way this newly formed engineering business would have full control of their own destiny in terms of bidding for both local and overseas MRO work. They wouldn’t have Qantas breathing down their neck everyday and at the same time Qantas would be freed of this ‘burden’ of expense.
If successful it would keep many employed in this profession in Australia rather than the somewhat inevitable downsizing that would happen if they remained tethered to Qantas.
Concorde,
I have a memory of reading somewhere, recently, about Air Canada’s maintenance division.
Apparently, they spun it off and gave it some (all?) their maintenance work. The spin-off deal was finalised in February, and now AC have decided to send all their maintenance elsewhere. [Of course, I may well have misunderstood.]
Different situation to what you are suggesting above, I agree. But I would expect that any Qantas maintenance spin-off would expect that a lot of their work came from QF … until QF decided otherwise.
Never underestimate the bean-counters.
Hey Ben,
Just wondering, when you say “neither management nor labor seem keen” in your third paragraph, are you talking about little-L labour, as in the working folk, or capital-L Labor, as in the political party?
It may seem like a trivial difference but it really changes the thrust of your point.
Meant labour and will change it. Many thanks
One major plane crash every 20 years acceptable to Qantas management?
If that plane was carrying 460 people, that equates to 23 people killed every year, or one death every couple of weeks or so.
Maybe Qantas figures that some airlines, like Garuda and Air France have much worse statistics and still survive, so why should Qantas waste money on engineering excellence?
From my observations the tyranny of distance and general shortage of overseas heavy maintenance slots will prevent significant overseas outsourcing of Qantas maintenance to some degree. Qantas will always want to control line maintenance and will also need their professional engineers to approve design changes and aircraft repairs, as well as aircraft reliability programs. The QF professional engineering group provides 24/7 aircraft repair approval capability and also provides approvals for escalation in component overhaul times worth many millions of dollars in savings in QF fleet operating costs.
Hey there Ben
Been a while since I have had time to read your blog. Can’t sleep, suffering from jetlag so I signed on. Probably regret it in the morning as now wide awake.
Anyway your article on: “Qantas, it’s all about Asia, death threats etc” certainly drew a response. Real mixed bag there. Ranged from people who want to see Qantas fall over because it has allegedly neglected Melbourne, to people advocating travelling via Helsinki to Europe, to people who said (and this is what is happening to Qantas in real life) why in the hell would you go Qantas (whether or not you connect to Finnair in Singapore or British Airways in Bangkok) two stops to anywhere beyond London or Frankfurt when you can go 1 stop with Emirates or Etihad and cheaper too; and another expressing the benefits of Emirates network over Etihad.
All a bit sad really.
I am sure that you must wish at times that you had an audience that actually knew at least something about airlines, airline economics and the commercial realities of the airline business.
And Ben, you yourself have never put forward any useful suggestions about what Qantas should do to stem the red ink flowing all over its ever diminishing international operations. You have just played the man. You have just been critical of Alan Joyce and say that he should be sacked.
You and I know (I do give you credit for knowing) that he has a hell of a task. And there are no simple solutions there. Unfortunately no silver bullets. Certainly no retreating as some suggest to being just a fair dinkum Aussie carrier and flying everywhere (let’s say Paris, Amsterdam, Rome, Athens, Milan, Vienna (and why not Helsinki while we are at it)) with a cost base thirty percent higher than real quality carriers like Singapore Airlines, Cathay Pacific, Emirates and Etihad, let alone Thai and Malaysian and Air China, China Southern, China Eastern (and one day soon a Hainan group airline) as well as your contemptible Garuda. And all of them with young slim chicks to boot. And let’s not forget the aircraft depreciation regime that they live in that makes it financially viable to replace aircraft after 10 years.
And Ben please do not come back to me again with an answer along the lines of the analogy you gave me of wartime Australia and a great leader like Ben Chifley “who did not give up when faced with insurmountable problems”. Spare me. Chifley was indeed a great man but he also got screwed over well and truly by the unions (even in wartime), his own party, as well as the opposition. In the end it broke him (along with his poor health, think he perhaps lost faith in humanity) and a sad day it was indeed.
Ben, Qantas has not given up. It will never give up. But it would be more helpful if knowledgable people like yourself stopped grinding their own personal axe on people and personalities and actually put forward some constructive dialogue and stopped playing to an ill-informed audience who slap you on the back and say Hooray! Congratulations! Well done! everytime you make a negative comment about the Qantas executive management and the Board. It is simpleton stuff. And you know it.
As I have said before, in the 25 years or so that I have read your articles, I cannot remember one that was in any way complimentary about Qantas.
I am not an apologist for Qantas; I am very critical of it; particularly its staff attitudes over the eons. But I do appreciate what it is facing right now; problems that have been gradually accumulating (primarily in the past 10 years or so) and I might add not in any way the fault of the management other than perhaps for not taking a chainsaw to the place.
Gotta be management…..
Blame the staff….
We’re the ones that have made all the wrong decisions to get the airline where it is today.
It was our decision the down grade to cr*p business class because there was no competition for a few years. Now that all the premiums are revolting it’s the staffs’ fault the product was cr*p and they’re leaving. It was our decision not to take the 777 when it was offered on a plate because the plastic cr*ptasitc was going to be late.
It’s our fault we fly 4 engine sh*teboxes on routes that only need 2 engine jets. It’s our fault that no one in middle management can make a decision, because a decision creates ownership of the problem, and ownership of the wrong solution might mean the loss of KPI’s which leads to the loss of bonuses.
Stop blaming the staff, the schumucks that turn up each day at the coal face and do the job to the best of their ability with the limited resources because you won’t spend any money till we start making money. Derr, thats the way to run a business.
Take a look around, see what everyone else is doing.
Singapore has retired its last 747-400
emirates is only flying it’s 777 on long haul sectors.
The fat ugly French slug is only doing shorter sectors.
Virgin is treating the premiums with the respect they paid for.
Talk to the limo drivers who only used to drop at the QF end and now only drop at the DJ end.
Stop weaving and worming trying to get a slice of the pot of gold.
It’s not hard to run an airline..
Fly the right aircraft to the right place at the right time.
Work it out you seam to think you’re a bunch of geniuses.
A lifetime of trust can be lost in a minute.
The passengers don’t trust you, and neither do the staff…
Ben,
Curiously enough PT has been alone in the media for some time in suggestion that accelerated depreciation along the lines of the government’s shipping reforms, and for their stated reasons of preserving skills and allowing fairer competition, ought to be applied to Australian airline flag carriers as well.
Similarly, this is the only place in the Australian aviation media that has advanced a case for the proposed Virgin Australia restructuring being equally allowable to Qantas.
These are both reforms that would remove some of the excuses for helpless mediocrity that Qantas trots out when it seeks to justify its decisions.
And there lies the problem at Qantas in a nutshell.
Management blame the unions (which are the staff).
The staff blame management.
Rome is burning.
Just who is steering the ship anyway? Ultimately the Captain cops the blame on an aircraft even if it were not his fault as he is the Captain.
Similarly management are the ones steering the business and if it is not performing, it’s their fault. They can blame the staff all they like, however if they truly believe this, it’s up to them to show leadership and lead the troops to a solution.
Instead they throw fat on the fire and wonder why staff misbehave and show the bird when they walk past.
At least there is plenty of thesis material for future MBAs
Here’s a few maintenance items to consider:
1. Fiber optic connectors. A little grease, or dust, dirt, fluid, and you’re out of business. Will the average person on the ramp know this? I can tell you the people in the factory know it and STILL have problems.
2. HUDs. These aren’t radios. Have a .01″ installation error, and you’re no longer conformal. I think the OEMs and airlines are WAY too casual about how complicated the HUDs are.
3. Composite inspection and repair. Boeing is being damned cagey about their delamination problem, and the fact that it takes two weeks per airframe to repair speaks volumes.
I don’t see any airline having the TYPE of engineering staff that will be able to address these issues, at least in the 5-year timeframe. HUDs will always remain the purview of the HUD manufacturers – they’re just too specialized.
Ben, I am more concerned about the reliability of Rolls-Royce engines in general, for which Qantas pretty much selected by default whenever there is a choice. Like you have suggested, Cathay Pacific suffered similar issues. Bear in mind RR workshop is located in Hong Kong (although is about 30km away from the airport!), you would have through Cathay would be better off logistically in terms of scheduling for service.
My concerns are:
1. Has the once famous RR quality pretty much disappeared as a result of RR pushing technological advancement too fast at the expense of quality and cost?
2. Has Qantas (or Cathay or even British Airways for the matter) select RR engines for new orders without giving any real thought of other engine makers, or they select it because RR offer the solution of “fix maintenance charge per hour of flying” makes accountants job of budgeting maintenance cost a lot easier?
Hi guys
I am not laying all the blame at the feet of the Qantas staff.
But one thing you can not get away from is that Qantas’ costs are about 30% higher than its primary full service international carrier competitors. And I am afraid that a lot of that difference relates to higher staff costs, higher engineering costs and moreover poor productivity. And this does not simply contain itself to Qantas; it relates to many other large business enterprises in Australia as well.
And on top of this, you have the long running poor staff attitude displayed by a large percentage of Qantas’ customer service staff who fail to see the connection between the customer service they deliver and the resultant public perception and the well-being of the airline that emplys them and there job security. That is why the intense campaign of Qantas engineers and the TWU to deliberately damage Qantas brand (and the pilots contributed to this as well) is absolutely despicable.
This same attitude is not displayed by Qantas international competitors nor the staff of either Virgin or Jetstar. These staff value their jobs and understand the connection because they have been the David against the Goliath. This recognised connection is there in Jetstar; it is there in Qantas Regional; it is there in Virgin and it was there in Virgin long before Borghetti came along.
As I have said in the blog before, Ansett flight attendant staff that I know who joined Qantas were mystified by the poor attitude displayed by Qantas staff that they were then working with; and this goes back to 2001 and 2002; not 2011 or 2012.
Ben, thank you for pointing out your advocacy of amending the depreciation schedule applicable to aircraft in Australia. It is something that should (must) be changed if Australian based airlines are to be competitive with overseas based airlines as far as fleet renewal is concerned. It applies to both Virgin and Qantas and to both their domestic and international fleets.
Certainly most of the armchair experts contributing to this blog who are Qantas pilots and engineers failed to realise this is the primary reason why Qantas fleet age is growing and aircraft are being retired later than off shore competitors. It comes down to financing, the balance sheet, profitablity and its ultimate impact on capex. And unfortunately you just cannot disregard these matters as some would naively believe.
If the depreciation rules were changed in Australia so that an aircraft can be fully depreciated in 10 years rather than the current 20 years; when added to Qantas’ excellent credit rating and hence its cost of capital (borrowings) in the marketplace; then Qantas would be in an excellent position to compete at least on the age of fleet front and the cost benefits that new-age aircraft bring as well as an improved customer proposition.
Also Ben I agree with you regarding the Virgin corporate restructuring. It is clever even if it is financial engineering.
If Qantas was allowed to structure itself in the same way then its share price would immediately skyrocket and at a rate greater than what Virgin’s will. Virgin’s certainly will. However the difference between them and Qantas is that unlike Virgin, Qantas has an investment grade credit rating by the ratings agencies. Some of you may say ‘well, big deal”, “woopy for Qantas”. Well it is a big deal, apart from what Qantas would pay in the market for money to finance its fleet, if the Qantas share register was more open to overseas investment, because of its investment grade rating it would appear on the indices and hence automatically it would get investment from the large institutional funds even though it was an airline which are traditionally looked at by the investment community as being risky investments. The fact that Qantas is one one of only two airlines in the world with an investment grade rating would put them apart and attract money like iron filings to a magnet. So if all you blog readers see the Qantas corporate structure being permitted to mimic Virgin’s, get in early and buy some Qantas shares and you will make a killing when enacted,
Anyway, that’s almost enough from me, other than to say apologies Ben for not recognsing two of your sensible advocacies (depreciation regime and foreign capital) and to also say to the muppet in the blog who said that running an airline is simple and simply means flying the aircraft to the right place at the right time only exhibits that they have bugger-all understanding of an airline business.
It is indeed part of the equation, but it is also just one small bit of running a successful, profitable airline. And to display the naietivity of such a comment I will leave you with an appropriate analogy of the logic exhibited. It is the same. “One day a man was walking along and he had an epiphany. He noticed that where-ever there was water that trees also grew. So he went and planted trees in the desert and then expected the water to come along”
Flying a certain type of aircraft aircraft to a certain place at a certain time is far short of any guarantee that you will sell enough seats at an appropriate price to make the service profitable because you see the said airline is not operating in a vacuum and there are many other commercial competitive forces at play.
Let me mention one real example that Qantas faces. Try for example comparing Qantas two-stop operations (hassle of multiple transfers domestic short-haul Europe, baggage transfers and general other hassles) to various points in Europe to the one-stop lower-priced (look at cost of operation) customer proposition of the ME carriers that also have modern equipment (look at depreciation regime and arab financing regime) and welcoming customer service staff (look at staff attitude and age) all sitting on top of the massive efficiencies gained of a hub operation (feed-in and feed-out on own fleet to support a viable multi-port network) geographically located to be able to almost one-stop everywhere on this planet.
And it does not stop there, for Qantas to be even near the ME carriers pricing for travel to/from points in Europe beyond its gateway of Frankfurt (very few passengers actually just fly to/from Frankfurt itself as a destination) it must absorb the cost (or most of it) of an intra-Europe connecting flight out of its Australia-Frankfurt fare (and vice versa other direction) which eats into the yield on the Qantas operated Australia-Frankfurt-Australia legs and makes them unprofitable. And if Qantas liftedthe fares to improve the yields then its load factor would almost certainly drop so regardless you get the bottom line that the cents per ASK (available seat kilometre [or mile, if you were a US carrier]) received in revenue is lower than the cents per ASK cost of the flight operation.
My job places me in a position to compare the executive management of most airlines in the world (well a couple of hundred anyway). Let me assure you that Qantas executive management are among the best, in fact superior to virtually all in light of the natural benefits bestowed on many airlines because of their geographic position, and this is why Qantas, this carrier at the end-of-the-line down there in Australia has punched above its weight for so many years. It now has a raft of major issues confronting it that were not there as little as 10 years ago. Australians (especially the Qantas staff) should actually be proud of the airline they have rather than constantly knocking it. Qantas regrettably has no simple solutions and I assure you it has received no free kicks from the Australian government; in fact to the contrary with the Australian open-skies policy. At least Qantas executive management know which way the wind is blowing and understand the problems, which is more than you can say for very many airlines in the world.
Wow Ben Beveridge……Your arrogance is overwhelming! I would love to know how I can get your job, jet lag, comparing executive management. Have you ever flown economy or driven a Toyota to work? Clearly you are part of the ruling classes. If you are seriously telling us that the executive management of QANTAS are among the best in the world, then why is the enterprise they manage such a basket case? Oh sorry, it’s the staff! I’ll bet Mars to a marble that 90% of those staff are career QANTAS employees whose life and livelihoods are totally bound up with the success of “their” airline. Regrettably I cannot say the same for the Johnny-come-latelys who inhabit most boardrooms and some senior management positions.
No, let’s blame the 50 year old Captain, the senior engineering supervisor, the flight attendant who is no longer the “young slim chicks to boot” that your avaricious first-class eyes wish to covet. These people will have given their whole working lives to QANTAS and all they want in return is for their bosses to congratulate them for what they do and allow them to be part of the airline instead of a “cost centre”. Some hope, the slippery slope started long ago at QANTAS, yet the Board has the affrontary to have one of the responsible CEOs still feeding off the profits.
Well now I’ve told you what I really think. Obviously I am one of great unwashed who you lump into the audience that you wish “actually knew at least something about airlines, airline economics and the commercial realities of the airline business.” Actually I am only a passenger and member of both the QANTAS Club (Gold) and Virgin Velocity (Platinum) clubs. But what would I know compared to someone as all-knowing as yourself. Have a Gin and Tonic for all the ignorant people of the world next time you travel to an “important” back slapping accountants get together. Cheers!
Um nuclear fission is mainly used to boil water. The production of massively toxic isotopes that can later be used for building nuclear weapons is only a side effect of boiling the water.