Qantas breaks bounds to settle pay dispute

QANTAS has failed to keep wage rises within its targeted range after agreeing to give aircraft engineers a rise of about 5 per cent per annum over four years.

QANTAS has failed to keep wage rises within its targeted range after agreeing to give aircraft engineers a rise of about 5 per cent per annum over four years.

The airline's decision on Friday to slash forecast growth in flights and costs arising from 1500 job cuts has also forced many analysts to revise downwards their profit forecasts for the airline.

Details of Qantas's in-principle agreement with the engineers' union, released yesterday, show that the 1500 staff will pocket an average increase of 4.75 per cent each year for the four-year term of the enterprise agreement. Some will gain a rise of more than 5 per cent.

"Compared to what came out in January, it's quite a better deal," an Australian Licensed Aircraft Engineers Association spokesman said yesterday.

The agreement will mean every aircraft engineer gets a grade rise.

A base-level engineer on grade three and earning $1023 a week before tax will, from January 1, 2007, go to grade four and pocket about $1150. The airline has also agreed to introduce another grade to allow those on the highest rung - grade 14 - to increase a grade.

The engineers will not vote on the agreement for two weeks but are expected to accept it, given that it meets the 5 per cent increase the union was seeking from Qantas. The airline had wanted to keep wages capped at a 3 per cent increase, plus a 1 per cent rise in superannuation for some staff.

Meanwhile, ABN Amro has been the most aggressive in hosing down its forecasts for Qantas profits in 2008-09, estimating a 40 per cent to just $377 million. The broker said it preferred to be conservative in forecasting profits given the aviation sector's tough operating conditions.

Qantas announced plans on Friday to axe 1500 jobs by Christmas to offset an almost doubling in jet fuel prices over the past year.

ABN Amro estimates the job cuts will save Qantas $120 million a year. The broker said the cost-saving measures were a more aggressive response to higher oil prices than the last round of cuts in May, indicating management had accepted fuel prices will remain high for the medium term.

The broker has also cut its expectation for Qantas's dividend to 20c a share, from 30c, for both this financial year and 2009-10 because of its lower profit estimates.

Citi and Goldman Sachs JBWere also cut their profit estimates slightly, but UBS was almost a lone voice in raising its estimate by nearly 15 per cent to $414 million for 2008-09 due to a "more positive pricing outlook and lower unit costs".

Goldman Sachs has also joined some other brokers, including Merrill Lynch, in predicting Virgin will post a loss of almost $25 million in 2008-09.

Virgin is grounding a further two Boeing 737s, reducing flights, introducing new baggage fees and increasing "flexible fares" in response to the higher fuel prices that are crimping profits.

Shares in Virgin rose 3c to 71c yesterday while Qantas jumped 11c to $3.41.

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