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Jet fighters

4 November 2011 By Fiona Maharg-Bravo

Qantas’ shock decision to ground its planes last week ended its reputation as a conservative airline. Chief executive Alan Joyce turned its industrial action problem on its head and the carrier itself went on strike. That forced the government to intervene and halt the union walkout. But a permanent resolution to the conflict is on the cards. It appears increasingly likely that the controversial move was worth it.

In the short term, the cancellations may end up costing the airline more than the A$68 million incurred so far due to strikes themselves. The bill could reach A$60 million, according to Goldman Sachs, but that doesn’t count other initiatives to woo back customers like cutting fares. But on a long-term view, the calculation flips over. The costs of continued strike action, at A$15 million a week in lost revenue, would have been severe. The government’s intervention has given Qantas the upper hand: the parties must reach an agreement or face binding arbitration by an industrial relations tribunal.

It’s not hard to see why Joyce resorted to such extreme measures. Qantas has 15 unions and has reached agreement with 12 of them. The dispute with the holdouts centres on Qantas’ cost-cutting efforts and a decision to base more of its staff elsewhere. Qantas faces stiff competition on international routes from airlines backed by states with deep pockets, such as Emirates or Singapore Airlines. It may have made a headline A$552 million in pre-tax profit last year, but its international arm lost over A$200 million.

But Joyce was also his own worst enemy going into the dispute. Just before he grounded the airline, shareholders voted to give him a 71 percent pay rise, to A$5 million. He also infuriated customers, who didn’t seem aware of the depth of the union problems. British Airways managed to get the support of the public last year in its own labour dispute, but only after the unions scored some own goals and BA was deep in the red. Joyce has got investors on his side, with Qantas shares rising 5 percent in a market that has fallen since the grounding incident started. But if Joyce wants to maintain the upper hand, he must now win back the punters.

 

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