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Qantas: lockout « Previous | |Next »
October 30, 2011

Qantas has upped the ante in its industrial dispute with the unions with its decision to ground all its aircraft --both national and international. It has escalated the conflict rather than pursue the negotiating option. The indications are that the battle plan for a lockout has been planned for some time by the Qantas Board, and the dramatic escalation of its industrial dispute indicates Qantas' determination to play hardball in order to be break the power of the unions.

The Gillard government was forced to apply to Fair Work Australia to end the dispute because Qantas grounding its fleet forced the government's involvement. So a federal industrial tribunal has been utilized to resolve a major industrial dispute. Will it resolve the unions opposition to Qantas' determination to outsource and offshore some of its functions? Qantas claims that this is properly the domain of company management, not the unions.

The Fair Work Act provides a mechanism for resolution of the dispute through the industrial umpire, Fair Work Australia. Section 431 of the Fair Work Act allows the Minister to terminate industrial action immediately where it can be demonstrated the strike action will cause damage to an important part of the economy or is endangering the community (for example, a dispute affecting hospitals or emergency services). The Minister needs to be satisfied (ie. does not need to be justified legally) that the activity is causing serious damage to an important part of the economy.

The parties have 21 days to sort things out between them. If no agreement is reached, Fair Work Australia could then arbitrate an outcome of the dispute (or it could do so after a further 21-day conciliation period, if all parties agreed to that). Essentially, this would enable Fair Work Australia to broker an agreement determining employment conditions for the relevant Qantas staff for the next few years.

Ten years ago Qantas was widely hailed as one of the strongest airlines in the world. Qantas is now potentially squeezed between Virgin’s aggressive campaign for the premium domestic traveller and lower cost Asian competitors. Qantas International has an ageing, fuel-inefficient aircraft fleet that is compounded by delays in the delivery of new planes. It is running at a loss despite its protection.

Its strategic response has been to follow through the logic of the Jetstar model (cheaper labour) on a global scale even at the longer term expense of the Qantas brand. Its proposed regional hub model based in Asia depends in it regaining international competitiveness.

Qantas' rhetoric is to blame the unions for their unconstructive attitude to the reduced pay and working conditions, and their desire to have a say in how the company strategically responds to its situation of decline and its future as an international airline. In Crunch time for Qantas Stephen Bartholomeusz says:

the issues at the heart of the confrontation weren't conventional industrial relations issues. They were fundamentally about who controls the management and the strategy of the company as it seeks to stake out a viable future in an increasingly difficult international industry environment....Joyce and Clifford see Qantas' international future, in part, depending on creating a hub-style carrier out of Asia, with a combination of the Jetstar brand and a new premium carrier with work practices and cost structures that would enable the group to compete with the Asian and Middle Eastern carriers that have decimated its market share of routes into and out of Australia.The unions want to hang onto the privileged position they have inherited.

If the negotiations required by Fair Work Australia fail after 21 days, then a binding arbitration by Fair Work Australia will take place. It is this compulsory arbitration that the Liberal Party is opposed to.

| Posted by Gary Sauer-Thompson at 10:23 PM | | Comments (21)


Adele Ferguson says that Qantas is determined to beat the unions into submission to reduce costs so that it has a more flexible and lower-cost workforce. Qantas pilots are paid more than some regional counterparts, and that is what Qantas wants to change.

Peter Hartcher in the SMH points an accusing finger at the Gillard Government. They failed.

By allowing a shutdown, the government condoned social, business, economic and reputational damage on a national scale. It was a strategic partial isolation of an island continent. And it was quite unnecessary. Gillard should have demanded an immediate ministerial order directing the end of industrial action by the unions and the company. This would have kept the fleet flying. Fair Work Australia could have dealt with the dispute without damage to the national interest in the meantime.

Gillard has failed the test of this crisis. Yawn.

It's an unreasonable interpretation. Qantas kept telling the govt that it was negotiating and it did so on Friday. On Saturday it gave the government three hours notice that it was shutting the airline down at 5pm. Gillard then made an application to Fair Work Australia--an independent legal body--rather resolve the dispute by using the minister.

Contrary to the claims of the various business groups it looks as if Fair Work Australia is working. Fair Work Australia ordered an end to all industrial action by both the airline and the unions. Qantas will be back in the air and its workers back on the ground as early as this afternoon.

So it got the parties back to the negotiating table and the planes flying.

"Contrary to the claims of the various business groups it looks as if Fair Work Australia is working."

Peter Reith is claiming that:

The reality is that under Labor's legislation, the unions have more power. And Labor is dragging Australia back towards arbitration. There is no question that the reregulation of the workplace has triggered this dispute...This dispute is all about Labor's policy.

Why? Because it gives the unions too much power. This must be overturned by the Coalition.

According to this interpretation unions have far too much power and corporate management face one of two choices. Surrender to the unions and ultimately go out of business or go nuclear.

The former is not an option for the Liberal Party, given its deep mistrust of the union movement. So the labour market needs to be deregulated.

Peter Reith has no credibility.
Resorting to citing him is desperation on the part of the media.
Apparently, according to ABC Radio National anyway, Ltd News is claiming that the lock out by Qantas could have been stopped by a phone call to Qantas by the PM but this was specifically denied by Joyce this morning who stated that the report was false [or something similar].
Really something has got to be done to stop the crap emanating from Murdochistan.

On my reading of this item in The Age, Joyce has basically got what he wanted:

"Mr Joyce, said he, too, wanted the dispute terminated. If Fair Work Australia had chosen instead to suspend the dispute, Mr Joyce said he would have kept the fleet grounded because a suspension would not have ended end the unrest and uncertainty".

There is a technical difference between having the dispute terminated and having the dispute suspended. I'm not entirely sure what that difference implies, but I am sure that no reporter knows (or cares) either. However it seems to me that the Govt. and/or Fair Work Australia have caved in.

"unions have far too much power and corporate management face one of two choices. Surrender to the unions and ultimately go out of business or go nuclear.The former is not an option for the Liberal Party, given its deep mistrust of the union movement. So the labour market needs to be deregulated."

Chris Kenny in the Australian ---PM on collision course with destiny---- says that this dispute goes to the heart of modern Labor's identity crisis.

It has been clear that unions are seeking to dictate how Qantas should run its business by locking in work practices and eliminating outsourcing.We can all sympathise with the aim of maximising Australian jobs, but these are decisions for management and the board, not the unions.

According to Kenny, the Gillard Government must take a position on whether the unions' tactics and demands are acceptable or whether Qantas, and other companies, have a right to try to make their operations internationally competitive.

Kenny implies that the Gillard Govt must confront a national crisis like the Qantas dispute from a much broader viewpoint than what best suits the unions.

Kenny seems to forget that the industrial dispute is in the hands of Fair Work Australia--an independent umpire.

In Another quandary trips up Canberra in The Australian Dennis Shanahan puts the boot into Gillard.

This point is that the Qantas issue shows that Gillard is weak. Why? Because she should have intervened much earlier because she knew what was going to happen. Shanahan finishes thus:

When Qantas responded and grounded its fleet to bring the dispute to a head and force the government to intervene it was as if it hadn't been considered as a possibility...Given Qantas was thinking about grounding its fleet for a while, why did no one in the government consider this a possibility without being told - just as they seemed incapable of imagining a High Court defeat on offshore processing of asylum-seekers. It's probably because the government spends too much time dealing with each crisis. Well, now there's another one.

Why is Gillard weak? Because she was reluctant about becoming involved in a dispute that involves some of the most influential unions.

It's the same old conservative line. Unions rule. The Gillard Govt is their prisoner. So it cannot act decisively etc etc

Gordon says "Joyce has basically got what he wanted" because
workers now have their main bargaining power quashed.The result ( after 21 days or such extension as given) will be much less than the Qantas workers wanted re conditions and pay.

There is the fallout from the lockout to consider. We can expect to see Qantas' market share decrease as customers defect to other airlines--eg., Virgin and Etihad. Qantas' international market share will slip as well. The Qantas brand will be impacted particularly as their world airline ranking continues to slip and its international operations are already losing more than $200 million a year.

Qantas is losing money and is shedding market share and relevance in its flagship international business so it has to regain competitiveness on its international routes by reducing Qantas cost structures. This strategy was being blocked by the unions.

Gordon says:
"There is a technical difference between having the dispute terminated and having the dispute suspended. I'm not entirely sure what that difference implies, but I am sure that no reporter knows (or cares) either."

Division 6 of the Fair Work Act (2009) gives Fair Work Australia the power to overrule the unions’ right to strike by suspending or terminating protected industrial action. Suspension doesn’t end the dispute, but termination does.

Gordon says "However it seems to me that the Govt. and/or Fair Work Australia have caved in."

Saturday’s grounding of the Qantas fleet ensured that the political pressure was such that the Labor government was forced to argue against the unions and with Qantas for termination, not suspension.The unions wanted a 120-day suspension, which would have kept the dispute alive.

Gary Sauer-Thompson:
So the Govt. actually argued for termination rather than suspension before the FWC?

I understand that the Gillard Government sought a full ‘termination’ of industrial action at Fair Work Australia.

The emergency hearing of the full bench of the FWA tribunal ruled in favour of termination after a long deliberation. This opens a 21 day negotiation period that can be extended for a further 21 days, but only if progress is being made to break the stalemate between pilots, engineers and baggage staff and the airline.

Negotiation is what the Gillard Govt has wanted--to get around the table and talk the issues through.

If there is no progress between pilots, engineers and baggage staff and the airline, then the door to the negotiating room is slammed shut for both parties at the 21-day mark. A binding arbitration by FWA will then take place.

There appears to be very little chance of an agreement within three weeks as neither side is willing to back down.

Thanks, Annon. I saw an interview today on Midday Report (ABC) where an academic (can't remember his name) was saying that the IR legislation forbids strikes about things like QANTAS' offshoring and labour hire policies. That would mean, I suppose, that the eventual arbitrated outcome, if it is arbitrated, will be narrow and limited to conditions for existing staff. Maybe the only features of interest will be termination payments!

In Question Time today the Coaltion attempt to link the Qantas dispute narrative back to the "Gillard leadership" narrative that the "campaigning newspaper" THe Australian, News Ltd (and the Liberal Party) have spent the last twelve months building.

Gillard failed, says Abbott, because she didn't pick up the phone to Joyce at Qantas on Saturday, and stop him grounding the fleet.

They got nowhere. Their performance was shoddy.

The unfortunate part of what is a good system with Fair Work is that unions do tend to use the EBA process to cultivate membership. The TWU in particular.

gordon asks
"So the Govt. actually argued for termination rather than suspension before the FWC? "

Looking at the decision by Fair Work Australia we can see that the Minister has made application for an order under s.424 of the Fair Work Act 2009 terminating, or in the alternative suspending for a period of 90 days.

The Government was being consistent with the thrust of its own Act, that such matters ought to be subject to judicial determination rather than the Minister using the powers available to him under section 431 of the Fair Work Act.

There is an interesting Crikey piece on the lockout/dispute here, with an on-link to another piece by B.Sandilands which is also worth reading:

Qantas may well discover to its' long term cost that customers have memories once they endured the bitter lesson not to trust the product. As others have observed the airline business is not like selling iron ore to a monopoly buyer such as the Chinese Government.

Maybe the Crikey piece I linked above has the answer:

"But from Joyce’s point of view, there’s no particular problem with brand damage, because his longer-term strategy is offshoring anyway. Why worry about damaging the airline’s brand if your goal is to run that airline down anyway and replace it with offshore-based airlines?"

That would make it close to what Americans call "control fraud".

Leigh Clifford, the Qantas chairman, and Alan Joyce, the chief executive, are gambling that when this dispute reaches arbitration in a month, as it surely will, they will emerge victorious in regard to their plans to introduce more contract workers on lower pay scales than the unionised workforce.