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18 Jan 2013

Last piece of the puzzle falls into place for Qantas

Many were quick to criticise in October 2011 when Qantas CEO Alan Joyce announced that he intended to ground the entire Qantas domestic fleet, lock out approximately 3000 employees, and leave potentially thousands of passengers stranded globally. As we know, this forced the Australian Government to take action in Fair Work Australia, which terminated Qantas' lockout and the unions' industrial action following an urgent hearing.

But as the Fair Work Commission (as it is now known) yesterday handed down its last workplace determination arising from that action, it is difficult for an independent observer to characterise the strategy of Joyce and Qantas as anything but a success.

Qantas took the action it did because the relevant unions were causing it "death by a thousand cuts". In particular, one tactic engineered by the Australian Licenced Aircraft Engineers Association (ALAEA) and Transport Workers Union (TWU) was causing Qantas significant damage. The tactic was to notify Qantas of an impending stoppage, and after Qantas had cancelled flights and rearranged schedules, cancel the stoppage. The costs incurred by Qantas because of this tactic and the other industrial action had reached $68 million and was threatening to cause revenue losses of approximately $15 million per week. Nonetheless, the industrial action was of itself not sufficient to permit the intervention of Fair Work Australia. So Qantas did what many observers thought was the unthinkable.

Qantas obtained the termination of industrial action - but what was the outcome?

After Fair Work Australia terminated the industrial action, the parties were required to try and finalise an agreement within a 21 day period (extendable to 42 days). Failing agreement Fair Work Australia would arbitrate.

The outcome of all this was:

  • in December 2011 Qantas and the ALAEA reached a consent position which did not contain the most significant job security claims pushed for by the ALAEA and allowed Qantas to manage its business, including offshoring of A380 maintenance;
  • in August 2012 Fair Work Australia rejected the TWU's claims for a cap on Qantas' use of contractors and for contractors to be given the same terms and conditions as Qantas employees; and
  • in January 2013 the Fair Work Commission rejected the claim by the Australian and International Pilots Association (AIPA) for all "Qantas flying" to be done by Qantas pilots or by persons receiving Qantas terms and conditions.

In hindsight, who won the battle?

While the determinations carried some "wins" for the unions, on balance each was a significant win for Qantas in terms of resisting the key fetters the unions sought to place on Qantas' ability to manage its businesses. The Qantas strategy was a controversial and potentially risky one - but in hindsight it was one that has paid off for Qantas. Its brand damage appears to have been limited and temporary and Qantas appears to have achieved what it wanted out of the workplace determinations. While the grounding cost it a lot of money (Qantas reported over $120 million in costs due to the grounding and lost forward bookings and customer loyalty), it also stopped the ongoing losses caused by the industrial action taken by the unions and prevented the losses that may have flowed from giving in to the unions' key demands.

Lessons for employers

The Qantas strategy will not be one emulated often; it was a high risk/high cost strategy but had high potential gain. It also relied upon the significance of Qantas to the economy forcing the Australian Government to take action and giving Fair Work Australia the ability to terminate the industrial action. Not many other employers will be in such a position. However the lesson for employers should be that every possible alternative, no matter how potentially risky or costly it may be, should at least be considered when the employer is faced with industrial action.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.