A half-baked conclusion for Qantas unions

Alan Joyce now looks likely to retain all the management powers needed for the chance to recreate Qantas’ international operations as a viable business.

The Qantas engineers who promised to bake the airline slowly ended up with a half-baked outcome, gaining only conventional outcomes from their bitter and costly dispute with Qantas rather than the controversial interventions in the future management of the business that they sought.

While trying to put a positive, if somewhat half-hearted, spin on the agreement they finally reached with Qantas yesterday, what the union won from the dispute was a four-year agreement (which, because it is backdated, will only run for three years) involving pay increases and protection of existing Australian jobs.

Where they didn’t succeed was in their preposterous attempt to force Qantas to conduct all heavy maintenance of its aircraft, including the fleet of A380s and Boeing 787s it will eventually have, in Australia.

That would have forced the construction of a new maintenance facility at a cost of $85 million to $90 million. Now Qantas will be able to conduct maintenance of those aircraft offshore, which means that the engineers’ attempt to force and entrench the use of existing work practices onto a new generation of aircraft has also failed.

The key reasons Alan Joyce took the momentous decision to ground the Qantas fleet rather than succumb to the demands of the three unions it was in dispute with – the engineers, pilots and Transport Workers Union – were that they wanted to impose work practices on Qantas that would become outdated once the new plans arrive, and effectively wanted to prevent it from outsourcing and offshoring work by expanding its Jetstar brand and creating its proposed new regional premium brand.

From Qantas’ perspective, pay increases and short-term job security weren’t major issues. Effectively giving unions influence or control over key elements of what would conventionally be regarded as management decision-making and flexibility were. It was that attempted intrusion into management and the elements of extra-territoriality in the union claims that forced Joyce into a drastic response.

While there are two unions yet to settle, the agreement with the engineers tends to vindicate Joyce’s actions. He hasn’t compromised on the issues that really mattered to Qantas and the engineers won’t be able to take any industrial action until 2015.

Forcing the federal government into referring the disputes to Fair Work Australia and ultimately into arbitration means the remaining unions also can’t take action for up to four years, which has undermined the leverage they had and were exercising until Joyce grounded the fleet.

It was the recognition that they were almost certainly going to fail to get their more ambitious and unconventional claims up within the binding arbitration process that appears to have caused the engineers to abandon them and come to a more traditional agreement with Qantas than the more radical relationship they were seeking.

The remaining unions would be as aware that if the protracted arbitration process runs its course it is unlikely they will gain anything more than pay rises and some limited job security.

No one believes Fair Work Australia will effectively intervene in the management of the airline, extend its jurisdiction beyond the national borders or extend the terms and conditions of employment of the unions concerned to contractors or other Qantas group employees. Until the arbitrations process ends, however, no one can be certain of its outcome.

In the circumstances, as the engineers recognised, the sensible strategy is to use the uncertainty about what might ultimately occur to drive the best deal possible for their members (although the pilots are trying to challenge their inclusion in the arbitration process). Joyce has now demonstrated his willingness to cut a deal on pay and conditions that don’t restrict his ability to manage.

The confrontation with the unions cost Qantas about $100 million and significant brand damage – but the grounding at least averted the prospect it faced of losing $85 million a month and doing truly severe and permanent damage to its operations.

Joyce still has to cut a deal with the remaining two unions, or hope for an acceptable outcome from the arbitration. Whatever happens, however, he not only limited the damage to the group when he took that fateful decision in October but now looks likely to retain all the discretions he needs to have any prospect of restructuring Qantas’ international operations to create a viable business.