When you think about airline labor disputes, you probably think about strikes. After years and years of negotiating, the unions gain the right to walk out and that shuts the airline down, or it at least hampers its operations significantly. This weekend, we were faced with something else. Fans of the National Basketball Assocation (if there are any left) certainly know this tactic well: lockout. Qantas management decided to shut down the airline and lock out labor to force an agreement. Unlike the NBA, this required a quick resolution, so the government stepped in and made the airline fly. It’s exactly what CEO Alan Joyce wanted, but he’s going to get a lot more than he bargained for.
In Alan’s mind, he’s saving the airline from ruin.
There has been an ongoing dispute with labor for years at Qantas. This issue in particular centered around the pilots, mechanics, and baggage handlers. Most of the problems stem from a couple things. Qantas employees believe they deserve all the compensation in the world while Qantas management disagrees. Qantas is actively trying to go around them by setting up subsidiaries elsewhere, most notably with low cost carrier Jetstar which has employees with different work rules and pay rates.
This move has had the Qantas employees steaming for years, and it only got worse when Qantas announced it would set up a new premium airline in Asia as well. The assumption is that Qantas employees are not going to be a part of that enterprise because the pay and work rules for the Australian airline just don’t work in the world today.
Labor likes to point to the continued profitability of Qantas and how the airline can’t just push them aside in favor of cheap labor just to goose profits further. But Qantas is quick to respond that profits don’t come from the core international airline operation. That has been a money-loser and there needs to be changes in pay/work rules to get closer to what other airlines pay. That point is certainly up for debate in my mind.
The reality is that like in everything else, a compromise is necessary, but just as we see in the US political scene these days, none is at hand. There has been increasing industrial action from the labor groups with little strikes here and there. The mechanics have been working to rule and Qantas has seen performance suffer significantly.
Alan Joyce is Crazy … Like a Fox?
So what can Qantas do? It could keep negotiating in a situation where no deal will ever be made, or it could do something drastic. Alan chose Option B; he went scorched earth and shut down the airline.
Now why the heck would someone do that? It’s actually a clever move. (Don’t read that as me supporting it, but it is clever.) First, it shows the labor groups that Qantas is not screwing around. Alan is willing to shut the place down if the unions won’t come to the table and get serious about an agreement that works. Note that Jetstar, Qantaslink and JetConnect subsidiaries all kept running – it’s just Qantas itself that shut down. Qantas wants the unions to think that this will be a permanent solution if things don’t get resolved.
But more importantly, it pushes the government to get involved. The expectation had to be that by doing this on Saturday, the government would have acted swiftly and had the airline up and running again by the end of the weekend. That’s exactly what’s happening, though cancellations are likely to persist into the week as operations ramp back up. I think it probably took a little longer for the government to act than Qantas thought.
Qantas spent the weekend shut down but now, with the government’s urging, Fair Work Australia made the airline start flying again. The airline was deemed to be too vital to the economy to let it stay shut down, and that’s exactly what Alan was banking on. The airline was forced to re-start operations and labor has to stop all industrial action. Labor and management will enter into intensive negotiations over a 21 day period. if that doesn’t work, they go to binding arbitration.
And that’s probably what needs to happen here, because both sides seem completely loony to me with their thoughts about what’s right. If someone rational gets in the middle and strikes something fair, both sides will be unhappy but at least this will all be over.
So does that make this a smart move? It’s certainly a creative way to force the government into action, but it is also highly destructive of the relationship with every single employee as well as with the traveling public. Sure, it will end the industrial action but at what cost?
Some employees may have supported Qantas management before; not the unions, perhaps, but others. Now with this reckless grounding, employees have to be livid and somewhat nervous. I would start looking for a new job if this is how my senior management behaved. I certainly would have lost a great deal of respect for management.
If you pull a stunt like this and inconvenience thousands of travelers, you run the risk of pushing them off permanently. In the past, Qantas really didn’t have much competition within Australia or even to and from the country, but that has changed dramatically. Internationally, there are more flights every day from Asian/Middle Eastern carriers, and Qantas management isn’t shy to talk about it. That’s why it wants concessions from the union.
Virgin Australia Must Be Smiling
The biggest winner, however, is Virgin Australia. Even though Qantas wasn’t putting people on other airlines, Virgin responded quickly by offering discounted fares to Qantas fliers, lounge access for Qantas elites, and a bulked up schedule to accommodate the stranded folks. It also saw partners step in to help. Etihad offered to start flying routes on the airline’s behalf to pick up the slack.
For Virgin, it’s exactly what it needs. The airline has changed itself to focus on business travelers over the last year or so, and this is the perfect way to show Qantas loyalists what it can do. Those who have been burned by Qantas may not go back, or so Virgin Australia hopes. But Alan Joyce thinks that he’s found the way to success and he’s making that gamble.
Will people, employees and travelers alike, leave Qantas over this and look for better options? Qantas is betting that won’t happen, but I wouldn’t be so sure. Qantas has probably done serious harm to itself here. I would expect calls for Alan Joyce’s head to get louder and louder. But maybe that’s what the airline wants? Maybe, as the unions think, Qantas wants to shut down the old airline and start anew with cheaper labor and lower costs.
Now there’s a scary tale that you can tell at your Halloween party tonight.
