FWA clears the air for Qantas

The Fair Work Commission's Qantas judgement shatters the logic behind accusations of cost-shifting which are being lobbed ahead of the group's proposed Emirates alliance.

Last week, without much fanfare, the Fair Work Commission wrote the epilogue to the traumatic two-year industrial relations saga that saw Alan Joyce take the unprecedented, costly and extraordinarily controversial step of grounding the entire Qantas fleet.

While both Qantas and the Australian and International Pilots Association claimed victory from the Fair Work Commission’s rulings, a central decision vindicated the stance Joyce took to prevent its long haul pilots from extending the generous and quite intrusive terms of their award beyond Qantas mainline to all other badges within the group, including QantasLink, Jetstar and Jetconnect and any other subsidiaries Qantas might create in future.

While the pilots amended that claim and the extent to which its job security provisions would apply to focus only on planes with Qantas ‘’livery,’’ the commission decided it hadn’t been persuaded that the coverage of the award should be extended beyond what is effectively Qantas mainline.

Qantas hailed the decision as an affirmation of its management’s right to manage its business and retain flexibility while the AIPA said Qantas had missed an opportunity to obtain significant productivity gains and made the inarguable point that no-one had emerged a winner from the ‘’debacle’’. The dispute cost Qantas the best part of $200 million.

The reality, however, was that the 2011 dispute with three unions could, had Joyce not truncated it so dramatically, have been prolonged indefinitely and the unions’ strategy of causing Qantas maximum harm with minimal cost to their members – the ‘’bake them slowly’’ strategy – threatened the viability of the entire Qantas group. Qantas has previously settled the disputes with its engineers and the Transport Workers Union without conceding ‘’job security’’ claims or other restrictions on its right to manage.

The Fair Work Commission decision, a 126-page document, is mind-numbingly micro and detailed and provides a disconcerting insight into how arcane, bureaucratic and deeply intrusive Qantas’ industrial relations environment is.

While it appears to contain minor wins for both sides, and the AIPA was particularly pleased that the next set of negotiations will be held within two years rather than the four Qantas was seeking, the big win for Qantas was simply in avoiding what might have happened had the pilots been able to impose their will on the group rather than the detail of the new agreement.

The other ‘’win’’ was that the commission accepted Qantas’ submissions about the ‘’formidable’’ structural disadvantages its international business faced as an ‘’end-of-the-line’’ carrier competing with hub carriers with material cost advantages. It accepted that the cost of Qantas pilots was ‘’relatively high’’ compared to those of many of its competitors.

Significantly, it said it was evident that over the past year at least Qantas’ international business was not generating a return on the substantial capital invested in it. On Qantas’ own earnings pronouncements the international business has lost almost $700 million in the past two financial years.

The Fair Work Commission conclusion is significant because Qantas continues to be accused of scare-mongering in relation to its international business and of cost-shifting between its Qantas and Jetstar brands to exaggerate the losses within the international business.

The pilots and Qantas critics like independent Senator Nick Xenophon have recently called on the Australian Competition and Consumer Commission to conduct a ‘’forensic analysis’’ of the financial position of the international business as part of the authorisation process for Qantas’ proposed alliance with Emirates – despite the ACCC making it clear that the financial position of the business was irrelevant to its draft and interim decisions to approve the alliance.

Any rational person looking at the competitive dynamics and cost relativities in international aviation and how they impact on Qantas could only conclude that without drastic change Qantas’ international business is unviable and the odds against a successful salvage operation are daunting.

It helps, however, that the Fair Work Commission and, in the ACCC’s discussion of the industry settings, have broadly supported Qantas’ assertions.

The Fair Work Commission decision doesn’t by itself significantly improve Qantas’ position or the need for a continuation of the radical re-shaping of Qantas’ international operations.

It does, however, end the threat that the pilots could have extended the coverage of terms and conditions that are far more generous than most of Qantas’ competitors and worsened the already parlous position those operations are in.

The AIPA was probably right when it said there were no winners from the lengthy industrial dispute. Had the pilots won, of course – and had Joyce not grounded the fleet the unions would almost inevitably have dictated the terms of Qantas’ surrender – there would have been a very obvious and large-scale loser.

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