Qantas Engineering Review

Sydney, 22 November 2006

Qantas Airways said today it would review over the next 12 months whether to commit investment to major inhouse engineering and maintenance operations for its fleet of new aircraft.

The Chief Executive of Qantas, Mr Geoff Dixon, said the Review would be led by senior Engineering managers and undertaken in consultation with staff and the major unions.

"This is one of the most important decisions Qantas will make and it will be done openly and in an inclusive and constructive manner."

Mr Dixon said Qantas would take delivery of over 100 new Airbus A330 and A380 and Boeing 787 aircraft over the next 15 years.

"These aircraft will progressively replace the airline's 767 and 747 aircraft, which have been the mainstays of our long-haul fleet for many years.

"The changing face and economics of Maintenance Repair Operations (MRO) around the world compel us to consider how and where these aircraft will be maintained.

"Scale and efficiency are now the hallmarks of the MROs that are increasingly being used to maintain aircraft from an increasing number of large international airlines.

"The review is about trying to create conditions for the necessary investment to bring the maintenance of the A330 aircraft fleet, which will soon number around 30, into Australia.

"We need to decide by the second half of 2007 whether to bring the A330s, which are currently being maintained in the Philippines, onshore to Brisbane."

Mr Dixon said the Review was also about trying to create the conditions that would allow the B787, and even the A380, to be maintained in Australia.

He said the Review would include the airline's 737 Narrow-Body Maintenance operations at Tullamarine and its operations at Avalon, where over 800 people were employed.

"We have decided to leave the 737 work at Tullamarine pending this Review and while we assess options for a closer working relationship between the Tullamarine and Avalon operations."

He said that apart from normal 'overflow' work, the Review would not result in any existing maintenance work in Australia going overseas.

Mr Dixon said Qantas had two options for its Engineering and Maintenance into the future:

* endeavour to create an onshore, inhouse MRO that had the scale and efficiency to handle all its own and some third-party work in a competitive market; or
* commit to total maintenance solutions proposed by the aircraft manufacturers, or other providers, that would result in the progressive reduction of onshore maintenance activity.

"We would prefer the onshore, inhouse option and will work with our people to try and make it happen.

"This will not be easy as it will involve significant capital investment and cooperation to ensure workplace flexibility to create a competitive environment."

Other elements to be considered in the Review included:

* whether Qantas continued to provide line maintenance for client airlines in Australia; and
* whether line maintenance for the new B787 and A380 was done inhouse or by outsourced providers within Australia.

Mr Dixon said he had met on Monday with Bill Shorten, National Secretary of the Australian Workers Union (AWU), Doug Cameron National Secretary of the Australian Manufacturing Workers Union (AMWU), and Steve Purvinas, Federal Secretary of the Australian Licensed Engineers Association (ALEA), to discuss the Review.

"We assured the unions that they, along with our people, will be widely consulted.

"We will seek their input on what changes are required to provide Qantas with a world class competitive capability."

Qantas Engineering employs 6,300 skilled engineers 10 sites across Australia, including major facilities in Sydney, Tullamarine, Brisbane and Avalon. It is the world's 10th largest maintenance repair and overhaul operation (MRO) and one of Australia's largest private sector employers of apprentices, with more than 400 apprentices currently training.

Issued by Qantas Corporate Communication (3508)