Archer Capital Investor Brief

• Union-nominated pension trustees raise at their Board the fund’s exposure to Archer Capital Fund 5, a private equity vehicle; and,
• If there is exposure, arrange for the Board of trustees to take the steps outlined below.

Archer Capital is an Australian private equity firm, with $2 billion in funds under management, specializing in leveraged buyouts in Australia and New Zealand. Since inception, Archer Capital has closed over 35 acquisitions involving total aggregate funding in excess of $6 billion.

One of its current acquisitions is AeroCare, a provider of outsourced flight support services in Australia and New Zealand, which includes customer service, baggage and ramp handling, cleaning, and other ancillary services. AeroCare employs over 2,500 staff and services major domestic and international airlines across 35 airports in Australia and New Zealand.

AeroCare’s labour relations and work practices have been identified by the ASU and TWU as of significant concern. The main concerns are:

• Undermining freedom of association and the right to collective bargaining:
  AeroCare has engaged the services of First IR, a recognized anti-union labour relations consultancy organisation. The consultancy firm’s expertise is utilized by clients to deny the workforce the right to the assistance of unions in collective agreement making. This contravenes the CWC Guideline 2.7 and 2.8 on Social Dialogue.

• Labour standards and employment conditions:
  AeroCare has negotiated a non-union collective agreement that significantly undermines the Award Safety Net Minimum Standards for the Australian aviation industry. This agreement includes provisions such as:
  1. No guaranteed weekly hours within a monthly hours cycle.
  2. Work rosters can be altered at 2 hrs notice.
  3. Split shifts, which is resulting in employees being required to sleep rough at the airport while awaiting the second shift.
  4. No maximum shift duration.
  5. No specified minimum break between shifts.

There is no mechanism for reviewing wages over the 3-year life of the collective agreement. This contravenes the CWC Guideline 6.4 on pay levels.

Why is this a risk for investors?

Regulatory risks: The current employment model at AeroCare exposes investors to risks and challenges in light of developments in industrial law and practice in Australia.

Legal risks: The potential exposure to liability includes underpayments, labour conditions that present award compliance risks and non-conformity with OH&S standards.

Reputational risks: AeroCare was the subject of an Australian Broadcasting Corporation investigation, which garnered significant negative media attention. This could put future business opportunities at risk for the company and thereby reduce the value of the investment

Click here to view the full investor brief.