BACKGROUND NOTE, 22 June 2012

The gods must be crazy: chronology of and issues in the Qantas industrial dispute 2011

Steve O'Neill
Economics Section

The industrial dispute between Qantas and three of its unions can be seen in the context of Qantas’ attempts to remain viable in a highly competitive domestic and international aviation environment. This note details the background to the enterprise bargaining disputes in 2011 between Qantas and three of the unions with traditional membership coverage in respect of: international pilots, the AIPA (Australian and International Pilots Association); licensed aircraft maintenance engineers, ALAEA, (Australian Licenced Aircraft Engineers Association) and ground staff in Qantas, the TWU (Transport Workers Union).

Qantas’ position in the international airline market is more precarious than in the domestic market, with Qantas losing market share and incurring losses on its international operations. According to the Bureau of Infrastructure, Transport and Regional Economics, Qantas’ share of the international market (to/from Australia, as measured by the number of international passengers) fell by almost 15 percentage points from 34 per cent in 2000 to 19 per cent in 2010.[1] Also, Qantas’ return on equity is low.[2] A number of prominent aviation analysts have argued that in light of these trends, Qantas would be better off quitting the international sector.[3]

On the other hand, a significant commitment to the international sector is well underway with the purchase of Airbus A380 and Boeing 787 aircraft. For the pilots and engineers, in many respects, the October 2011 dispute has been about the long term operation and maintenance of these ‘new generation’ aircraft.  To put the Qantas operation in context, the Qantas Group of businesses has 35 000 staff and up to 48 collective agreements with 16 unions.[4]

On 29 October 2011 at 2pm, Qantas chief executive Alan Joyce announced the grounding of the Qantas domestic and international fleet in advance of employer response action (a lockout of those employees involved in the employee claim action) in response to industrial action of certain of its employees. However, not all parts of the business nor all of staff of the Qantas Group were directly involved in the October disputation. This action potentially affected 70 000 domestic and international passengers caught without warning through the cancellation of 447 flights, starting at 5pm on 29 October 2011.[5] From 8pm Monday 31 October approximately 3000 employees involved in disputes with Qantas were to be locked out. However, as Qantas argued, the fleet needed to be grounded before the lockout could be effected for safety reasons.[6] The aim of this action was to achieve termination of union industrial actions, which had been authorised by Fair Work Australia (FWA) under the procedures stipulated in the Fair Work Act 2009 for initiating such actions over 2011. In the event the industrial actions were terminated. Qantas was aware of the Act’s requirement to re-engage in bargaining (without industrial action) and where matters were not resolved, to have these arbitrated by FWA. In this event, Qantas was hoping to rely on the traditional reluctance of industrial tribunals to intervene in managerial issues.

Qantas’ actions prompted an immediate application to FWA by the Workplace Relations Minister, Senator the Hon Chris Evans, to terminate (rather than suspend) industrial action (comprising union bans and the employer’s foreshadowed lockout of certain employees). Orders to this effect were issued by FWA on 30 October 2011 and Qantas planes commenced to fly from 31 October 2011.

The fallout so far

The fallout from the dispute and the aircraft grounding has been considerable. Most important is the public perception of employer initiated industrial action and the difficulty of coming to terms with it. In many respects it represents quite a different set of factors to the pilots dispute of 1989, where the pursuit of wage increases outside the parameters set by the ALP-ACTU Accord (Australian Labor Party - Australian Council of Trade Unions) turned the Hawke Government stridently against the Australian Federation of Air Pilots.

Related to the public reaction to the airline’s grounding, has been the public’s regard for FWA’s ending of the industrial action which facilitated the return of aircraft to scheduled flights. One opinion poll rated the performance of all parties involved in the dispute. Only FWA emerged well with 55 per cent approval and 21 per cent disapproval followed by (in order) Qantas workers, Prime Minister Gillard and the Government, Qantas CEO Alan Joyce, Opposition Leader the Hon Tony Abbott, Qantas management and last, union leaders.[7]

Further there has been the fillip given to the Government on workplace relations with commentators noting that workplace relations is seen as a policy strength for Prime Minister Gillard and an issue that rebuilds the Government’s support in its heartland.[8] It wasn’t always the case. For much of 2011, the Government padded off calls by employer groups for major reforms to the Fair Work system.[9] However, following the actions of 29 October 2011, Minister Evans has flagged that in the scheduled 2012 review of the Fair Work Act[10], the Government will consider whether there should be a ‘bargaining code’ incorporated into the Fair Work Act for employers, unions and workers.[11] Another factor is the views of the Prime Minister giving added weight to the question of whether job security provisions should be included as terms of enterprise agreements:

It's certainly true that the bargaining system we introduced under the Fair Work Act does enable working people to bargain on things like job security, and so they should - they should be able to bargain on job security. [12]

Countenancing the inclusion of such terms in workplace agreements was off the agenda under the former Workplace Relations Act 1996. As Australian Human Resources Institute National President, Peter Wilson put it:

Before 2009, many of the present items on the table would not have been among a union log of claims because they were prohibited content, such as restrictions on hiring contractors. But they are lawful today.[13]

The issues of the content of enterprise agreements and whether job security terms should be included or prohibited are shaping up as a focal point of difference between business and the labour movement. This is evident in the Australian Industry Group’s decision to challenge a recent job security decision of Fair Work Australia in the Federal Court.[14] In addition Adam Bandt MP (Australian Greens) has announced that he will introduce a private members' bill that would impose limits on employers planning Qantas-style lockouts.[15] Further, the AIPA has applied to the Federal Court challenging FWA’s order of 31 October 2011 to cease industrial action arguing that the proposed lockout was disproportionate to AIPA members’ actions of wearing different coloured ties and making public address statements.

Finally, the union movement is signalling its agenda for reforms to the Fair Work system, for example, in the comments of ACTU Secretary Jeff Lawrence about access to arbitration of industrial disputes:

Fundamentally we think that the whole question of arbitration really needs to be revisited ... We’ve got the ability to get arbitration where an employer takes an extreme step like Qantas and threatens to lockout people. But the ability for workers to get arbitration is really quite confined.[16]

FWA’s order of 31 October 2011 required bargaining to resume and continue for three weeks. This period is now up and has failed to solve all of the matters in dispute. Possibly the best the unions can hope for under the stipulated arbitration process is that the Federal Court will countenance the resumption of industrial action in the AIPA application.

Alternatively, the High Court’s approach in Re Cram could exercise influence on FWA in its arbitration role, giving some authority to the notion that managerial issues may be included in the matters to be determined:

... it was the prerogative of management to decide how a business enterprise should operate and whom it should employ, without the workforce having any stake in the making of such decisions ... Over the years that climate of opinion has changed quite radically ... Many management decisions, once viewed as the sole prerogative of management, are now correctly seen as directly affecting the relationship of employer and employee and constituting an "industrial matter".[17]

Only time will tell what factors and matters FWA may decide to include in its arbitration. This Background Note will be updated until the matters with the three unions are determined. Thereafter, developments to the Fair Work system will continue to be monitored in the Parliamentary Library’s Fair Work Chronology.[18]

Milestones

Details

Source Documents

23 August 2010

AIPA canvasses its members (1700 pilots are involved in Qantas long haul operations) as to the issues for renewing its enterprise agreement. These go to concerns over the use of Qantas subsidiaries to employ pilots on lower rates (as with the JetConnect airline)

Qantas pilots rally over "offshoring' fears

15 February 2011

ALAEA’s enterprise agreement with Qantas terminated in December 2010 allowing the union to pursue a new log of claims. These include job security provisions centring around a)the construction of a heavy maintenance facility for the A380 by the time the A380 fleet reaches 12 (20 are planned) and b) that contractors are paid the same wages as Qantas staff.

Qantas faces bumpy flight on wage bargaining

15 March 2011

ALAEA applies to FWA for orders to authorise a secret ballot of its members for industrial action. The action to include: strikes of up to 48 hours, stop-work meetings, work to rule, overtime bans, bans on higher duties, refusing to feed data into software and similar. Action  to commence after Easter.

Engineers lay down ultimatum on jobs 

Ballot order

9 May 2011

ALAEA members to stop work from one and half hours in the morning and for half an hour in the afternoon well as refusing certain duties, after their union claimed bargaining negotiations with the airline had "hit a brick wall".

Qantas faces strike threat

10 May 2011

TWU develops its ‘foundation principles’ for making an agreement with Qantas.

TWU bargaining principles

26 May 2011

FWA grants AIPA secret ballot order for the taking of protected industrial action.

FWA Transcript

10 June 2011

FWA approves an enterprise agreement between the Australian Services Union and Qantas applying to 7,200 administrative employees.

Qantas Airways Limited [2011] FWA 3632 (10 June 2011)

22 July 2011

AIPA commences its protected industrial action of making in flight announcements to passengers promoting job security.

Pilots to put case to passengers

27 July 2011

FWA authorises TWU to hold a secret ballot for protected industrial action.

FWA order

16 August 2011

Qantas announces a major restructure that will cut 1000 jobs. It proposes to establish a new Asian-based premium airline. Jetstar would establish Jetstar Japan, with Qantas holding a 42% stake. Qantas would reduce flights on the Kangaroo route between Hong Kong/Bangkok and London and delay the arrival of six of its planned fleet of 20 A380 fleet until as late as 2021.

Captain Joyce charts new course

Speech by Qantas chief executive Alan Joyce, August 16, 2011

24 August 2011

Qantas releases its financial report pre-tax profit of $552 million, up 46% on last year. It also doubled its net profit to $250m although the international operation lost about $200m. Chief executive Alan Joyce argues the company was still not delivering a good return on shareholders' investment: "To put it in context ... we're a $15 billion business and we're making $550 million."

Qantas belies tales of woe by doubling net profit

6 September 2011

FWA refuses an AIPA claim  to have pilots employed by NZ-based subsidiary JetConnect regulated by Australian IR laws.

Australian and International Pilots Association v Qantas Airways Limited and Jetconnect Limited [2011] FWAFB 3706 (6 September 2011)

14 September 2011

TWU proposes to take 4 hour stop work involving 3800 members as well as imposing bans. Qantas accuses the three unions of taking coordinated industrial action claiming that 28 flights would be cancelled and 27 delayed.

Chaos looms as Qantas staff to strike next week

5 October 2011

Qantas alleges acts of intimidation against workers who worked during industrial action.

Police investigate intimidation in Qantas dispute

7 October 2011

Workplace Relations Minister Evans voices his concern at the bitterness of the Qantas dispute.

Address to ALERA Conference Fremantle

11 October 2011

Mr Purvinas ALAEA Secretary suggests that passengers intending to book over Christmas should choose another carrier.

Qantas strikes 'a game'

13 October 2011

Cancellations of scheduled flights and the grounding of 5 aircraft lead Tourism Minister, the Hon Martin Ferguson to signal intervention before FWA and to rebuke Mr Purvinas over his comments about passengers being advised to look to alternatives to Qantas, while Alan Joyce indicates that Qantas should work through the negotiation process rather than seeking the Government or itself to terminate bargaining.

Qantas stoush casts a pall over Christmas

14 October 2011

PM Gillard issues her statement that: "Qantas and the relevant unions are saying they want to negotiate this dispute. Well, I think they should get on and do it."

Gillard parachutes into Qantas battle

29 October 2011

Qantas Airlines CEO Alan Joyce announces the grounding of the entire Qantas domestic fleet prior to an employee lock out in response to enterprise bargaining actions and claims of three of its unions.

Qantas statement

31 October 2011

FWA Full Bench terminates all industrial action at Qantas under FW Act s.424. Parties directed to bargain for 21 days with a further 21 days if needed.

Decision in Minister For Tertiary Education, Skills, Jobs And Workplace Relations

1 November 2011

Labour lawyer Ron McCallum doubts that any arbitration of the matters in dispute will favour Qantas employees and unions, given the historical reluctance of tribunals to intervene in management issues.

Qantas in the recovery room

4 November 2011

The Senate Rural Affairs and Transport Legislation Committee’s inquiry into the Air Navigation and Civil Aviation Amendment (Aircraft Crew) Bill 2011, Qantas Sale Amendment (Still Call Australia Home) Bill 2011 seeks evidence from Mr Joyce about his decision to ground the Qantas fleet.

Committee Transcript

7 November 2011

Polling by Essential Research points to strong public support for the role played by FWA in ending aircraft grounding.

Essential: Qantas divides voters, Fair Work Australia the only winner

10 November 2011

AIPA commences a Federal Court challenge to FWA’s decision to terminate industrial action

Pilots throw a legal spanner in the works

21 November 2011

Qantas and AIPA, TWU and ALAEA fail to reach agreements in the prescribed 21 day timeframe.

Tribunal to decide Qantas dispute

28 November 2011

Qantas reports to the Australian Securities Exchange that the combined cost of industrial actions had cost the company $194m, comprising $70m from the grounding, $56m through lost customer loyalty and forward bookings and $68m from the union actions in the lead-up to the grounding.

Union battle costs Qantas a cool $200m 

17 December 2011

Former PM Keating opines that no response from the Government to move the dispute to FWA for a suspension of industrial action and therefore let the lockout of 29 October endure for a few weeks would have lead to the demise of Alan Joyce by the Qantas board and shareholders and bring the unions to a bargained outcome.

I would let Joyce sit there

19 December 2011

Qantas and ALAEA propose a consent agreement to FWA that delivers 3 per cent wage rises and ensures job security for existing engineers, but allows A380 maintenance offshore.

Qantas engineers get 3% wage rise, but face loss of jobs 

23 January 2012

FWA endorses provisions of the enterprise agreement proposed by Qantas and the ALAEA as a Workplace Determination. Its includes trainees performing basic maintenance under supervision, less restrictions on extended hours as well as terms from EBA 8.

Australian Licenced Aircraft Engineers Association, The v Qantas Airways Limited [2012] FWAFB 236 (23 January 2012)

16 February 2012

Qantas announces a restructure of its operations which will include exiting certain loss making routes and shift to more operationally efficient planes resulting in an initial 500 positions being lost, including 225 engineering (operations and office-based), 122 cabin crew, 65 catering staff, 50 pilots and 45 ground operations staff.

Chief's cuts earn market's approval

27 February 2012

Adam Bandt MP introduces a Bill to Federal Parliament to restrict access to employer lockouts, noting that ‘Qantas held a gun to its own head, blamed the unions and then waited for Fair Work Australia to intervene’.

Fair Work (Job Security and Fairer Bargaining) Amendment Bill 2012, Bill Home Page

22 March 2012

FWA commences arbitration hearings between Qantas and the TWU in relation to the 2011 industrial actions.

Tribunal begins hearing Qantas labour dispute

10 May 2012

The Federal Court finds that Qantas could respond to the industrial action of AIPA by use of a lock-out, and that such employer action need not be proportionate, rational or reasonable.

Australian and International Pilots Association v Fair Work Australia [2012] FCAFC 65 (10 May 2012)

21 May 2012

Qantas announces the closure of heavy maintenance at Tullamarine (Vic) moving most of the work to Brisbane (Qld) with 535 job losses.

Engineering jobs to go as Qantas consolidates

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[1].               R Webb, ‘The low flying kangaroo’, Flagpost entry, Parliamentary Library, 1 November 2011, viewed 9 November 2011, http://parliamentflagpost.blogspot.com/2011/11/low-flying-kangaroo.html.

[2].               P Wells, ‘Staff cuts crucial for Qantas to fly’, The Australian Financial Review, 21 November 2011, viewed 22 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1240914%22

[3].               J Strachan, ‘Smith is amazed airline has survived without paying lower wages’, Sunday Canberra Times, 30 October 2011, viewed 22 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1189107%22

[4].               S Bussell and J Farrow, ‘Continuity and change, the Fair Work Act in Aviation’, Journal of Industrial Relations, v.53 n.3 June 2011, viewed 1 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22library%2Fjrnart%2F950725%22.

[5].               ‘M Bleby, ‘Flying roo jumps back into the air, The Australian Financial Review, 1 November 2011, viewed 21 November 2011, p. 5, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1242050%22

[6].               ‘War declared on unions after months of bitter conflict’, Sunday Mail Brisbane, 30 October 2011, viewed 21 November 2011, p. 5, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1189856%22

[7].               B Keane, ‘Essential: Qantas divides voters, Fair Work Australia the only winner’, Crikey Canberra, 7 November 2011, viewed 8 November 2011, http://www.crikey.com.au/2011/11/07/essential-qantas-divides-voters-fair-work-australia-the-only-winner/.

[8].               D Crowe and P Kerr, ‘A tilt at the income scales for women’, The Australian Financial Review, 11 November 2011, p. 14, viewed  14 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1216846%22

[9].               See for example E Hannan, ‘Evans rebuts both sides on Fair Work’, The Australian, 14 April 2011, p.2, viewed 14 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F695525%22.

[10].               The Explanatory Memorandum to the Fair Work Bill 2008 canvassed a review of the Fair Work legislation to be conducted in 2012.

[11].               M Skulley, ‘Bargaining code on review agenda’, The Australian Financial Review, 9 November 2011, p.11, viewed 14 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1212315%22

[12].               Transcript of Joint Press Conference (Prime Minister Gillard, Minister Evans and Minister Albanese) 31 October 2011 Interview http://www.pm.gov.au/press-office/transcript-joint-press-conference-canberra-18.

[13].               P Wilson, ‘It was time to ask the umpire’, The Australian Financial Review, 15 November 2011, p. 59, viewed 14 November 2011,  http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1226468%22

[14].               ‘AiG to challenge ADJ Contract ruling’, 16 November 2011, viewed 18 November 2011, Workplace Express.com.au.

[15].               A Bandt ‘Bandt moves to limit Qantas style lockouts’, Media release, 3 November 2011, viewed 21 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressrel%2F1202283%22

[16].               M Skulley, ‘Unions want stronger hand’, The Australian Financial Review, 14 November 2011, p.3, viewed 14 November 2011, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F1224326%22

[17]               Re Cram; Ex parte NSW Colliery Proprietors' Association Ltd [1987] HCA 28, (16 July 1987) viewed 14 November 2011, http://www.austlii.edu.au/au/cases/cth/HCA/1987/28.html.

[18].               S O’Neill, Chronology of Fair Work: background, events and related legislation, Background note, updated November 2011, viewed 22 November 2011, http://www.aph.gov.au/Library/pubs/BN/eco/Chron_FWAct.pdf.