Emirates Subsidiary Set To Reevaluate Its Australian Business

Some 4,500 jobs are at risk after following Emirates’ decision to review the Australian operations of its catering and grounding handling subsidiary Dnata. This follows a decision by the Australian Government not to subsidize the salaries of local employees when working for a business that is 100% foreign-owned. Dnata is owned by Emirates, which is owned by the Dubai Government.

Emirates subsidiary Dnata is threatening to exit Australia. Photo: John Taggart via Wikimedia Commons.

Emirates subsidiary employs 4,500 people in Australia to provide airline support services

Dnata is at ten airports around Australia. In addition to Emirates, they provide catering and grounding handling services for 29 other airlines, including Qantas. The Emirates subsidiary services 27,000 flights annually in Australia. Their services range from frontline check-in to ramp services, baggage handling, cleaning, and catering (via their Alpha Flight Group subsidiary).

The business had previously flagged that it might be forced to permanently lay off employees and wind down operations as aircraft movements collapsed over recent months. Some 4,000 of Dnata’s 4,500 Australian employees have already been temporarily stood down.

The Australian Government has started providing taxpayer monies to local businesses to keep paying workers who otherwise would have been laid off. The USD$84 billion JobKeeper program provides USD$975 per fortnight to businesses to pass onto their employees. Over 700,000 businesses have signed on.

Dnata ruled ineligible for subsidies and not happy about it

But late last week, the Australian Government excluded businesses that are 100% foreign-owned, ruling Dnata ineligible. The government’s view is that it isn’t their job to subsidize the payroll of foreign companies.

The news didn’t impress Dnata. The company told The Financial Times;

“The exclusion of Dnata from the JobKeeper scheme puts over 4,500 jobs at risk while leaving employees and their families without income with extremely short notice. As a result, we are also forced to review medium and long-term viability of Dnata’s various Australian businesses, including catering, cargo, ground handling, retail, and hospitality.”

Dnata is one of the major airline catering businesses in Australia. Photo: pxfuel.com

Local unions representing the affected employees are also unhappy, calling the decision “outrageous” and “narrow-minded.”

Dnata says had they been eligible for the salary subsidies, the stood down employees would have been reinstated.

An under the radar problem facing airlines when they start flying again

The threat to reevaluate its Australian operations highlights an under the radar problem facing the airline industry.

While many governments are providing subsidies to keep airlines ticking over, the airlines need extensive logistical support from back-of-house businesses like Dnata to continue operating. Increasingly, airlines have contracted out core services like cleaning, baggage handling, and catering.

Without these services, flights cannot happen, and that gives businesses like Dnata some leverage. Or so many reckon.

Airlines need contracted ground and back-of-house services if they are to resume flying. Photo: Aeroprints.com via Wikimedia Commons.

“Not only will this hurt workers in Australia, it will also hamper efforts to get air travel back up and running when restrictions lift, impacting on our economy. Companies like Dnata carry out behind the scenes work at our airports which gets aircraft into the sky. Their work is vital, and thousands depend on it,” said Michael Kaine, national secretary of the Transport Workers Union this week.

Mr Kaine raises a valid point. Governments are keen on supporting airlines and keen for them to get back flying. But to fly again, the services and infrastructure that support airlines need to be maintained. The Australian Government is unlikely to bow to bluster and threats from Dnata, but the issue does highlight the need to keep those back-of-house industries that support airlines ticking over.