An independent tribunal in Australia has ordered a permanent end to the industrial dispute that has grounded all Qantas flights.
Fair Work Australia issued its ruling after hearing evidence from the airline, unions and government at an emergency session in Melbourne. Nearly 70,000 people have been affected by the cancellation of hundreds of flights in 22 countries.
Qantas has been dispute with three unions over several months. The row came to a head in August after the airline announced plans for restructuring and moving some operations to Asia.
Australia’s government welcomed the decision, with Assistant Treasurer Bill Shorten saying: “We are pleased that after 24 hours of turmoil, commonsense has been restored.”
This dispute that has seen national airline Qantas ground all national and international flights
Qantas chief executive Alan Joyce had warned it would only resume operations if the tribunal ordered a permanent end, rather than merely a suspension, of industrial action. But he said flights could resume within hours once a permanent end was ordered.
Secretary of the ACTU union Jeff Lawrence said the ruling had made it clear that union action was not causing harm to the economy and that it was Qantas’s actions that had brought the tribunal’s intervention.
He said the ruling showed Qantas’s decision to lockout its workers and ground aircraft was a disproportionate response to the unions’ negotiating position.
Qantas said 68,000 passengers had been affected by the grounding of 108 aircraft in 22 cities worldwide
The airline announced its decision to ground all flights on Saturday, saying it was a necessary reaction to industrial action that was costing AUS$15m a week.
Australia’s Prime Minister Julia Gillard had earlier said the dispute between the airline and unions needed to be halted. A government lawyer said the shutdown was costing the Australian economy “tens of millions” of dollars every hour.
And now a sinking share price leaves the Australian carrier ripe for a takeover, as Adele Ferguson writes in the Sydney Morning Herald.
“The bombshell decision to ground all planes – except Jetstar and its regional carriers – has been pitched by Joyce as the only available option to save the wounded kangaroo from being half gone in 12 months and tens of thousands of jobs potentially at risk.
The airline has been trying to arrange hotels or beds for passengers who have been stranded
“Tough times have long been a recurring theme at Qantas, and the latest round of challenges – rising oil prices, natural disasters, competitors that are government owned and therefore don’t have to pacify shareholders, industrial action and midair emergencies – is nothing new.
“What is new, and is now the biggest threat to the airline, is the damage to its brand. The big winners from this will be its competitors, who are already starting to dance on Qantas’s shallow grave.
“Joyce recently accused the unions of running a ‘kamikaze’ campaign that was likely to drive customers to competing airlines. The grounding of flights without notice is a bigger kamikaze campaign, and if allowed to continue for a month would wipe out its entire 2011 profit base of $552 million. It would also create enough bad blood among customers that they would choke on it.
Unions have been angry over pay, conditions and plans for restructuring and moving some operations to Asia
“This is the country’s national carrier, it is the backbone of the multibillion-dollar tourism industry, and for that reason Fair Work Australia or the Gillard government needs to find a solution – and fast.
“The reality is Qantas’s survivability and its brand is more complex than the union battles that the company has been embroiled in for the past nine months. It boils down to a few factors.
“First, a decision by previous management not to invest in 777 planes, which are more fuel-efficient than the many old planes Qantas continues to fly and which most of their competitors are now using. This made Qantas less competitive at a time of rising fuel costs. To try to compensate for poor decision-making, Joyce embarked on a strategy to try to reduce labour costs and cut international routes by Jetstar-ising the Qantas brand.
The industrial action is costing the airline AUS$15m ($16m) a week, the company says
“This can be readily seen by the number of Jetstar ads on TV, the number of new, more fuel-efficient planes allocated to Jetstar and the black art of accounting which doesn’t make it clear whether Jetstar pays for all its own costs or some are carried by Qantas. Put simply, Jetstar has a more flexible and lower-cost workforce so the Qantas management team are trying to attack the labour-cost side of the business.
“Nevertheless, while it is true the disputes have cost the airline $68 million as well as done untold damage to the brand, Qantas is one of the few profitable airlines in the world and it is the only airline to boast an investment-grade credit rating.
“Indeed, Qantas reported more than half a billion dollars in profits in the latest financial year, which was far better than everyone had expected and was 46 per cent higher than the previous year, despite the $224 million hurt caused by the many natural disasters, including the Queensland floods, the Japanese earthquake and the Chilean volcanic ash. If it hadn’t been for these, its overall profit would have been a whopping $700 million-plus.
The Australian Prime Minister had to tell leaders attending a summit that their own travel plans have been hit
“The reality is all its businesses are doing well, except the international airline business, which Joyce says is losing more than $200 million a year. It is this business that some argue is helping bankroll some of Jetstar’s costs.
“The two biggest costs for an airline are labour and fuel. Qantas’s labour bill across the empire was $3.7 billion and fuel was $3.6 billion in 2011. Fuel costs can’t be controlled, but labour can – if the unions can be crushed. Qantas pilots are paid more than some regional counterparts, and that is what Qantas wants to change.
“With some of its bigger institutional shareholders putting pressure on the board to restore dividends after none for two years and lift its share price, which is trading below $1.55, a far cry from the $5 peak it hit before the global financial crisis, Joyce and the Qantas board decided to make industrial relations the weapon to cut costs and maintain margins and yields. In doing so they have driven the share price into the ground, making it a sitting duck for a takeover.”
Emma Ward in Sydney
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[via the Sydney Morning Herald]
