Qantas has notified around 2,000 employees that it will move to outsource ground handling operations at ten airports across Australia.
The decision comes as the flag-carrier works to recover from the Covid-19 crisis.
In August, the airline announced its reasons for needing to restructure its ground handling operations, which includes baggage handling and aircraft cleaning, and commenced a review of external bids from specialist ground handlers and in-house bids from employees.
The Transport Workers Union (TWU) submitted a bid to keep the service in-house on behalf of employees in accordance with terms in the enterprise agreement.
However, the bid was, by their own admission, “theoretical” with no roadmap of how projected cost savings would be achieved.
It also did not meet the objectives relating to capital expenditure on ground services equipment nor matching the ground handling services (and their cost) to fluctuating levels of demand, the airline said.
While proposals from employees at various ports did include detailed plans that would save around $18 million, there remained a significant gap compared to what was offered by third party providers.
A number of external bidders, some of whom already provide these services at 55 airports across Australia, were able to meet all of the objectives, including reducing annual costs by approximately $103 million.
The preferred bidders are being notified today and, subject to consultation and finalising contract terms, transition is intended to occur in the first quarter of 2021.
As required under its enterprise agreement, Qantas will now consult with its ground handling employees and their representatives on the next steps.
Affected employees will be entitled to a redundancy package and given support to transition to new jobs outside the business.
Qantas domestic and international chief executive, Andrew David, said: “This is another tough day for Qantas, particularly for our ground handling teams and their families.
“We thank every one of them for their professionalism and contribution over the years supporting our customers and operations.
“Unfortunately, Covid-19 has turned aviation upside down.
“Airlines around the world are having to make dramatic decisions in order to survive and the damage will take years to repair.”
Jetstar has already transitioned its ground handling operations at six airports to external suppliers – a decision that was announced at the same time Qantas announced its review process.
In August, we also announced a separate proposal to outsource crew bus services in-and-around Sydney Airport, potentially affecting around 50 employees.
This review process is ongoing with a decision expected before the end of the year.
The announcement follows a $2.7 billion statutory loss for the Group in financial 2020 due to Covid-19 and associated border restrictions.
Further significant losses are projected in 2021 due to a drop of revenue in excess of $10 billion.
Since the beginning of the pandemic, the Qantas Group has taken on in excess of $1.5 billion in additional debt.
David added: “The TWU’s in-house bid claimed that significant savings could be made but it failed to outline sufficient practical detail on how this might be achieved, despite us requesting this information multiple times throughout the process.
“Even with the involvement of a large accounting firm, the bid falls well short of what the specialist external providers were able to come up with.
“We have used these specialist ground handlers at many Australian airports for decades and they’ve proven they can deliver a safe and reliable service more efficiently than it’s currently done in-house.
“This isn’t a reflection on our people, but it is a reflection of economies of scale and the urgent need we have because of Covid-19 to unlock these efficiencies.”