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Air NZ has 'cynical ploy' to reduce labour costs

Air NZ has 'cynical ploy' to reduce labour costs by threat of outsourcing says union

The proposal to outsource Air NZ's ground handling services to multi-national company Swissport is a cynical ploy to extract reductions in terms and conditions from the workers, the Service and Food Workers Union says.

In a submission to Air NZ today [Friday, 22 December], the SFWU has pointed out that the company's financial performance over the past four years has been very healthy for the airline industry.

Jill Ovens, SFWU Northern Region Secretary, says Air NZ's 2006 profit was $96 million. The number of passengers increased and at the same time, the company reduced its labour costs by employing fewer staff.

"But despite this, Air NZ has neglected its ground handling operations with outdated equipment, shortages in resources, unsustainable levels of overtime with unacceptably high accident rates, and low staff morale."

The SFWU says all these factors contributed to a fall in current profitability and management's solution was to cut labour costs.

"It is easier for Air NZ to squeeze wages and conditions than to negotiate ground handling rates with other customers and to find the managers who will be able to manage ground handling operations to world class standards.

"As we heard so many times during the consultation process, Air NZ wants to cut penal rates and allowances to be more competitive."

Ms Ovens says the only thing stopping Air NZ aggressively cutting labour costs is the SFWU, which refuses to make deals.

"It is clear the outsourcing proposal is about getting leverage for labour concessions. We suspect this has been the strategy since mid-2005, but at that stage it may have been seen to be a problem because of the tight labour market. Also issues around heavy engineering may have taken priority."

The SFWU says the change in leadership at Air NZ in late 2005 was a signal to unions that the company intended to proceed down a path of labour reform using the threat of outsourcing as leverage.

Ms Ovens says that when Air NZ sought comparisons for delivering ground handling operations, only one of the potential providers came in with a total cost that was lower than what Air NZ was already doing.

"With the Swissport outsourcing proposal coming in with a $20 million cost savings, Air NZ finally got the cards to play hard-ball with staff and their representatives.

"The aim of the game was to force the unions to make concessions and close the gap between the outsourcer price and the in-house cost of ground handling operations."

Ms Ovens says the SFWU was not prepared to play the game.

"The stakes are high. The cuts that Air NZ demands are not small. They are asking for a $15,000 drop in take-home pay for the average fulltime equivalent staff member."

Ms Ovens says the over-confidence in the business case was unbelievable.

"Maybe they assumed that the workforce would be robots that would never take any sick leave or other leave. Moreover, they would come to work on the press of the button by their supervisors whenever their supervisors need them - no need for a roster pattern any more."

Air NZ says it wants to outsource ground handling operations for many reasons, but the SFWU says the bottom line is to cut labour costs.

"Air NZ managers claim that the airline excels at flying passengers and cargo, but it does not know much about providing ground handling services. That's why they have to outsource. Is this a joke after 66 years of experience?"

Ms Ovens says managers defend outsourcing by arguing that it makes workplaces responsive to "the market", thereby promoting "organisational efficiency through competitive discipline".

"Although superficially attractive, their arguments cover for less noble motivations," Ms Ovens says. "They obscure the fact that outsourcing benefits profits primarily through weakening workplace rights and reducing wages and benefits."

The SFWU says that outsourcing can actually be less efficient than an in-house solution.

"Our experience has been that quality typically suffers when work is contracted out. This is because outsourcing creates conflicting supervision structures which worsen service.

"The cost of switching contractors can also worsen service. The reduced loyalty of workers in a contract environment manifests itself in higher turnover and lower incentives."

Ms Ovens says that outsourcing is used to "prove" that an organisation is taking a "hard look" at its operations, which can be helpful for the share price of the company.

But it avoids real evaluation.

"It is not surprising to find that while outsourcing proceeds at break-neck pace, bureaucratic inefficiencies are likely to increase."

END

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