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Qantas should gain from forced industrial dispute ruling


Qantas should stand to gain from the forced settlement Australia's industrial umpire Fair Work Australia (FWA) will make after Qantas and its unions – representing pilots, engineers and ground employees – failed to reach a settlement today, the expiry of a 21-day period given to them under the Fair Work Act.

The settlement will create a new three-year binding agreement. Under Australian law, no industrial action cannot be taken prior to the expiry of an arbitrated agreement, protecting Qantas from industrial action from its major unions through late 2014.

Claims from the unions representing pilots and ground handlers centred on job security and wage increases. Qantas says it has offered pay rises while making clear it cannot guarantee job security. Industrial body FWA will be hard pressed to agree with unions over their job security claims. FWA has shown a disposition towards Qantas, but any employee pay rise management views as unfavourable can be re-negotiated in three years.

No agreement with AIPA, ALAEA or TWU

As of the afternoon on 21-Nov-2011, Qantas was still in negotiations with its engineers union, the Australian Licensed Aircraft Engineers Association. (In the evening, Qantas disclosed the matter with ALAEA would also head to the industrial umpire.) Qantas and the pilots union, the Australian and International Pilots Association (AIPA), mutually elected to refer the matter to FWA, Qantas made clear. The circumstances with the ground handlers union, the Transport Workers Union (TWU), are not evident, but earlier statements by its leadership made clear that the TWU did not favour an arbitrated solution. There was in all cases the possibility of a further 21 day period of negotiation, but for this to occur, each party had to agree. This apparently did not occur, propelling the process into a compulsory arbitrated resolution.

FWA showed a disposition to Qantas during last month's arbitration that ended Qantas' self-imposed grounding when it took industrial action and locked out members from the three unions in response to threatened action, which FWA also terminated. Qantas' initial claim, however, was bolstered with support from multiple government officials who wanted the matter resolved and not prolonged.

Qantas flagged on 21-Nov-2011 that prior to a FWA decision it may reach agreement with the unions on lesser matters, but probbaly not on the key component for management and employees: job security.

Job security, not present in other industries, demanded in aviation

Negotiations over new three-year contracts have been ongoing for six months. CEO Alan Joyce – who is understood to think Qantas came out at the short end of the last round of negotiations in 2008, before he became CEO – has made clear Qantas' long haul operation has too high a cost base, putting it at a competitive disadvantage to Asian airlines and Middle Eastern network carriers. Mr Joyce says the cost base must be lowered it to secure Qantas' future.

“For the first time we’re standing up and saying no to the unions,” Mr Joyce said in Aug-2011. “Qantas has a competitive disadvantage that has to change to be in the market for the longer term and to survive. We will do what we have to do in order to defend that position and make sure we build a stronger and better Qantas. If that means abstention with union leaders, if that means abstention with some of the members, than so be it. It’s for the good of the company and we have to do it,” Mr Joyce said. “We will defend the company for the future.”

Mr Joyce had been even more blunt in Apr-2011 when he stated, “It is no more in my power to guarantee jobs in writing than to promise that Santa will swing by on 24-Dec.”

FWA, even though nine of its 11 commissioners are former union officials or advocates, would be hard-pressed to identify a sector that offers job security and then decree Qantas must offer it. This component would have the largest long-term affect on Qantas as it seeks to expand its Jetstar franchise (AIPA is pushing for Jetstar pilots to be paid on Qantas' more expensive wages, whenever a Qantas code is involved) and establish a new premium airline likely based in Singapore that would employ pilots on contracts relative to local market conditions, but lower than Australian wages.

If FWA does support the TWU's claim for a higher pay rise than Qantas is willing to offer, the decision may increase salary expenditure more than Qantas would like, applicable for at least three years. Qantas, however, will be able to make the compelling case that the unions are demanding a higher increase than they negotiated for earlier this year at competitor, Virgin Australia.

Jetconnect: a bad precedent for the unions

AIPA earlier this year attempted to have the 100 pilots of Qantas’ New Zealand-based Jetconnect subsidiary, launched in 2002, placed on Australian wages - despite being employed in New Zealand. Jetconnect, which operates with Qantas branding, flies 182 weekly trans-Tasman flights between Australia and New Zealand. Its 600 employees are under New Zealand contracts, which can support lower wages than in Australia, upsetting AIPA. AIPA brought a claim against Qantas to the same industrial relations body, the FWA, to place the New Zealand-based Jetconnect employees on Australian contracts. Fair Work Australia rejected the claim on 6-Sep-2011, after rejecting in 2007 AIPA’s claim to represent Jetconnect pilots. This further sets a bad precedent for the unions.

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