While an extensive restructuring by Qantas Airways has meant major changes for its engineering operation, the resulting savings have constituted one of the main factors in the carrier’s rapid financial turnaround.
The transformation over a relatively short period has been dramatic. Accelerated aircraft retirements have allowed consolidation of heavy maintenance facilities, the engineering workforce has been cut back significantly and efficiency gains have been realized in line maintenance and other areas.
Staff and cost cuts were also made in other parts of the business, helping Qantas reverse spiraling losses. The carrier posted a pretax underlying profit of AU$975 million ($720 million) for the fiscal year ending June 30, an improvement of AU$1.6 billion over the previous year.
Chris Nassenstein, executive manager of Qantas Engineering, says his division has “been right at the heart of the success” of the Qantas transformation program. The carrier “has had to modernize our [MRO] processes and get our footprint right to make sure that we’re globally competitive,” he says. However, along with the cuts, Qantas has also invested in expansion in some areas, particularly its Brisbane heavy maintenance facility.
As an example of the productivity gains achieved, Nassenstein cites reduced aircraft turn times. “We now have a third of our domestic flights turning around in 40 min. and [next] we’re introducing 35-min. turns, which is a significant increase in productivity and has led to record punctuality.”
The airline is targeting AU$2 billion in savings from its three-year transformation plan, unveiled in February 2014. Qantas has not detailed how much of the total will come from the engineering division, but it reported that this division accounted for AU$120 million in savings from January 2014-June 2015.
During this 18-month period, Qantas reduced its engineering workforce by 900 full-time positions. Going back further and taking 2012 as the baseline, the division has cut its workforce from 5,500 to 3,400.
The biggest change for the MRO operation has been the consolidation of mainline heavy maintenance. Qantas previously had three bases for this work, at Tullamarine in Melbourne, Avalon to the south of Melbourne, and Brisbane. Now heavy maintenance is performed only at the Brisbane facility.
The first to be phased out was Tullamarine, in 2012. The Avalon facility was closed by March 2014, after Qantas decided to outsource heavy checks for its shrinking fleet of Boeing 747-400s. The Avalon closure was included in the savings estimate from the transformation plan launched earlier that year.
Heavy maintenance for the carrier’s Boeing 737, 767 and Airbus A330 fleets was concentrated at Brisbane—although all the 767s have since been retired. Qantas spent AU$30 million upgrading the Brisbane facility to be its primary maintenance base.
The airline is currently conducting two major fleet refurbishments at Brisbane, on its A330s and 737-800s. A total of 28 A330s are to be refitted with new cabins, with 12 completed so far. Each of the aircraft takes three weeks to finish. Some of the work will also be done at the Sydney line maintenance base.
The 737 program is still in its early stages. Out of 67 737s, two have been refurbished, and a third is being worked on now. The cabin refit will include inflight entertainment content that can be streamed to passengers’ devices, except on aircraft that already have seatback screens. An extra row of seats is also being installed.
Recent retirements have left Qantas with 11 747s in its fleet, and Hong Kong-based Haeco has been selected to perform their heavy maintenance checks. The carrier has also contracted to send its Airbus A380 heavy work to Lufthansa Technik at its facilities in the Philippines or in Germany.
In each case, the carrier determined these fleets were too small to justify keeping an in-house heavy maintenance capability for them. However, Qantas stresses it still does most of its aircraft heavy maintenance in Australia, and is the only local carrier that can make such a claim. The airline argues the trend has actually been to in-source, because it made the decision to do the 737 and A330 refurbishment work itself when it easily could have sent it offshore.
“Like any MRO, we need to keep transforming and evolving with changes in the industry, but we do think having the only airline heavy maintenance operation in Australia is a major strategic asset and competitive advantage for us and will be for many years to come,” says Nassenstein.
No decision has been made on heavy maintenance arrangements for the Boeing 787-9s recently ordered. Qantas low-cost carrier subsidiary Jetstar has also not decided how it will handle heavy maintenance for the 787-8s it operates. Jetstar has a heavy maintenance facility for its Airbus A320-family aircraft in Newcastle, Australia.
Regional subsidiary QantasLink, meanwhile, is creating a heavy maintenance base in Canberra for its 18 Boeing 717s, due to open in October. The carrier has also expanded its facilities at Tamworth, where it does heavy work on its Bombardier turboprops.