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Engineering a solution

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Page context: Home > Transport International Magazine > Issue 23 April 2006 > Engineering a solution

George Ryde explains how unions at Air New Zealand used consultants and a legal challenge to contest the looming threat to over 600 maintenance and repair jobs

On 19 October 2005 Air New Zealand announced that it had plans to outsource two areas of the airline’s engineering business ANZES. The areas were the engine repair shop and the aircraft heavy maintenance, both located at the Auckland airport engineering facility. This would result in a loss of some 617 skilled jobs, equal to over 30 per cent of the ANZES workforce.

For almost two years the airline had engaged two firms of consultants to review the engineering business, Bearing Point and later AT Kearney. During this time, management indicated that the business was under stress, due to over-capacity in the global market, particularly in the Asia region, and the high value of the NZ Dollar, pricing them out of third party work. But at no time did they state that outsourcing was an option that they were considering.

ANZES has a world wide reputation for high quality work and the ANZES engineers were considered one of the most skilled and professional maintenance and repair workforces in the world. During 2001 when the airline almost went under, ANZES returned NZ $50 million to the bottom line. The airline was eventually saved by a government rescue plan that gave the state an 82 per cent holding in the carrier. Even at the time of the announcement, ANZES was still in profit.

Under the collective agreements that operate, there exists a 58-day process for consultation with the unions prior to any outsourcing. The two unions at ANZES, AMEA and EPMU, immediately launched a legal challenge to this process on the basis that it had never been intended or used for the outsourcing of jobs, but only on occasions when the volume of work in ANZES was more than could be handled. The company announced that they would resist this challenge and that the outsourcing would save the airline some NZ$100 million over five years.

Groundbreaking strategy

While the unions continued with their legal challenge, they continued to work on a “worst case scenario” that the 58 days was all the time they would have. The 58-day process was due to expire on 16 December 2005. The unions also engaged an external company of business accountants to examine the company’s proposal and assist them in preparing an alternative plan for ANZES. This was the first time in New Zealand that unions had taken such a step.

Air New Zealand was obliged under the collective agreement to make available to the unions all relevant information, which was contained in some 30 file boxes with management controlled access. Following consultation with their members the unions began the work of analysing this information along with their consultants.

We became convinced that there were serious flaws in some of the assumptions made by the company’s consultants. The main one being optimistic cost savings based on what prices they would be able to achieve for getting their aircraft and engines serviced offshore. The potential effect of such servicing on aircraft availability and flexibility of scheduling given the small fleet operated also cause concern.

During this period there was a “media war”, with statements coming from the company that they believed it would be impossible for the unions to find an alternative to the outsourcing and at the same time save the NZ$100 million. The unions lobbied the government and conducted a major public campaign called “fix our planes at home” with posters, stickers, a dedicated website and a media blitz.

We appeared to have won the argument with the public and with many members of parliament. The government however publicly sat on its hands, saying that even while it may be the major shareholder, the decision on business matters was one for the airline’s board. When rescuing the airline in 2001, the government had no nominated board members.

At this time the government was concerned at the shortage of skilled workers available in New Zealand. In fact aircraft engineers were on the “most required” list at the department of immigration. Any engineers lost at Air New Zealand would most likely go overseas as the airline was just about the only facility in the country where they could fully use their skills.

By 8 December the unions had received their members’ endorsement and were now in a position to present their alternative to the airline. A symbolic presentation was arranged on the steps of the airline’s corporate office in downtown Auckland at lunchtime. A Maori warrior made a ceremonial challenge as the union officials handed over their proposals. Unfortunately the company refused to attend to this challenge, which was considered an insult, particularly given the amount of use the airline made of Maori culture as part of its marketing.

Union merit acknowledged

The Employment Relations Authority ruled that the challenge on the 58-day process should be held over following a mediated process that would consider the viability of the union’s proposal. The conclusion of mediation was that there was merit in the union’s proposals and this was accepted by the company, which agreed that further time should be given to joint consideration with the unions. The further deadline was to be 9 February 2006.

Joint consideration was begun straight away, with the unions retaining their consultants for this exercise. The initial conclusion was that there was little anyone could find to help retain the Auckland Engine Shop. This was due to current work only able to be undertaken on aero engines that were coming to the end of their operating life.

Tooling up for new generation engines was considered impractical given the small scale of the ANZES shop and the current global overcapacity. Just as important were the arrangements under which engines are now operated by airlines, where they lease by the hour flown and all maintenance is carried out by the engine manufacturer.

As a result of this conclusion, on Monday 19 December Air New Zealand announced that they would be losing 110 jobs. This was a serious blow to the unions and their members and a hard thing to bear just before the Christmas break.

No redundancies would be confirmed until the consultation process on the Wide Bodied Heavy Maintenance had been completed, as it was hoped that some of these jobs could relocate.

Bitter pills

The remainder of the time available concentrated on saving the Wide Bodied Maintenance and the further 500 jobs at risk. The union’s proposal would retain the bulk of this work and at the same time give the opportunity to attract third party work to the hangars. Our proposal does include some serious changes to the way work would be organised.

There would be changes to shift arrangements that would allow greater flexibility to adjust staff to workloads and volumes. This would result in reduced earnings from shift penal rates. There would be the ability to allocate some worked overtime as time off in lieu, and there would be varied hours of work for the different seasons of the year to cope with workload fluctuations. New categories of staff could be introduced, allowing licensed engineers to spend most of their time on skilled work.

These will all be bitter pills for the union members to swallow, but the proposal would at least save an estimated 300 of the originally planned 617 job losses. It is hoped that all redundancies could be achieved by voluntary means.

Recent statements from the company claim that they believe the only way the union proposal will work is if these labour reforms apply across the whole of the ANZES business, including the Christchurch base, which carries out maintenance and repair on narrow-bodied aircraft. This part of the business currently makes good profits and enjoys around 70 per cent of the available maintenance of these aircraft in the region.

Cynics would argue that the company is using the global argument to drive down the terms and conditions of these skilled workers, who have nowhere else in New Zealand to use their skills and experience. There is real union concern as to the commitment of management to their competence, and to the concept of the retention of this work.

If the only tool management has is the hammer then it sees all workers and jobs simply as nails. Time will tell whether the airline’s senior management and board will consider the union response to this major challenge in a responsible way.

George Ryde is national secretary of the AMEA union in New Zealand.

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Issue 23 April 2006

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