Bloomberg News

Joyce Courts Fliers After Qantas Lockout as Deadline Looms

November 02, 2011

(Updates share price in 10th paragraph.)

Nov. 1 (Bloomberg) -- Qantas Airways Ltd. Chief Executive Officer Alan Joyce is trying to appease passengers while facing a 21-day deadline to settle labor disputes that spurred him to shut down Australia’s largest airline.

“We will be doing all that we can to put things right,” Joyce, 45, said yesterday in a televised press conference as he announced the end of the two-day grounding and apologized for disruptions that stranded 80,000 fliers. He halted flights at the main Qantas unit after weeks of sporadic strikes that he said were killing the carrier by “a thousand cuts.”

Joyce now has to mollify customers as Virgin Australia and Emirates Airline lure disgruntled corporate travelers. He also has to reach agreements with unions he has said are making “impossible demands” or face the prospect of a potential lengthy arbitration process that would end with the national labor regulator imposing a solution on Sydney-based Qantas.

“From Qantas’s point of view, arbitration could be a nightmare,” said Marcus Clayton, national practice group leader of industrial and employment law claims at Slater & Gordon LLP in Melbourne. “You don’t know what the tribunal will do” at the end of it, he said.

Fair Work Australia set the 21-day deadline when handing down a decision barring strikes and a planned Qantas lockout. At the end of the period, the agency can either agree to another 21 days of talks or name an arbitrator to decide on a binding plan.

During the process, unions can request access to financial documents and challenge the airline’s claims against their proposals, Clayton said.

‘Tactical Victory’

“Qantas had a very large tactical victory” in securing a strike ban, said Allan Drake-Brockman, an industrial-relations lawyer at DLA Piper in Perth. Still, the final “outcome could be something that they didn’t want.”

Joyce announced an immediate halt to flights on Oct. 29 after stoppages by baggage handlers and engineers seeking higher pay and job-security measures. The disruptions cost the carrier A$68 million ($72 million) and caused bookings to plunge. Long- haul pilots were also protesting over employment conditions.

Qantas flights have all returned to normal today and services are on time, it said in an e-mailed statement. The company operated 65 international and 139 domestic flights yesterday.

Fair Work Australia’s ban on further union actions sent the shares up for a second day, with the stock rising 1.1 percent to an almost two-month high of A$1.63 in Sydney, after a 4.4 percent advance yesterday. The shares have plunged 36 percent in 2011 because of the labor disputes, rising competition and cooling global travel.

Virgin Australia

“There’s a bit more certainty than there has been for a number of months,” said Don Williams, chief investment officer at Platypus Asset Management Ltd. in Sydney, which has A$1.8 billion under management.

Still, the parent of Virgin Australia, the nation’s No. 2 carrier, also gained 4.2 percent yesterday on speculation the grounding may help it win over Qantas fliers. Virgin Blue Holdings Ltd. unit has revamped its image and abandoned a low- cost strategy to target business travelers.

Qantas may need to cut airfares and boost advertising to win back customers and ease passenger anger caused by the dispute, said Douglas Dow, an associate professor of business strategy at the University of Melbourne’s business school.

‘Short Memory’

“Qantas will need to spend a bit of money to cajole the customers,” Dow said. “Their customers are angry but the consumer can have an incredibly short memory.”

Joyce is counting on 90-year-old Qantas’s nationwide network, its 65 percent market share and what he called an “amazingly resilient brand” to help retain customers. Budget arm Jetstar, regional carrier Qantaslink and another unit that flies to New Zealand weren’t part of the dispute.

Mark Wright, who was stuck in Melbourne because of the grounding, isn’t sure the Qantas name will be enough to keep his employer loyal to the Flying Kangaroo. All of his trips are booked by the trucking company that he works for in the mining town of Kalgoorlie, Western Australia, he said.

“I’m sure they’ll be looking to change airlines,” he said. “Over the last four to five months with all the hassles they’ve had, it’s put them out of pocket. It’s put me out of pocket as well.”

1,000 Job Cuts

Qantas’s conflict with the three unions, the only ones among 15 yet to sign pay deals, had increased since Joyce announced plans in August to cut 1,000 jobs and create two new Asian carriers as he tries to turn around A$200 million of annual losses from international flights.

The airline’s share of long-haul travel has dropped to below 20 percent amid competition from Middle Eastern carriers and low-cost Asian rivals.

Joyce took over as CEO of Qantas in November 2008 after Geoff Dixon retired. Before that, the Dublin-born Joyce set up and ran Jetstar, after stints at the now-bankrupt Australian carrier Ansett Airlines and at Ireland’s biggest airline Aer Lingus.

Before moving to Australia in 1996, Joyce earned an undergraduate degree in physics and mathematics, and a master’s degree in management science at Trinity College, Dublin. He has also become a campaigner for cancer awareness after prostate surgery earlier this year.

‘Quite Tough’

“Alan is a very stoic sort of a guy, but he’s quite tough,” said Conor McCarthy, who worked with Joyce at Aer Lingus before becoming CEO of Dublin Aerospace and a board member at AirAsia Bhd. “Even with his prostate cancer he had his operation and was back at work within a matter of weeks.”

Joyce, now an Australian citizen, wasn’t available for comment for this story yesterday, said Luke Enright, a Qantas spokesman.

Joyce decided on the lockout less than 24 hours after facing investors and union pickets at the company’s annual general meeting on Oct. 28. His pay package of about A$5 million for the year ended June, which included A$2 million of base salary, was also approved at the AGM in Sydney.

The next day, Joyce won support from the board for the lockout plans. He then told senior managers about it a few hours before the public announcement, Lyell Strambi, group executive of operations, said at a Fair Work Australia hearing.

“It was a very dramatic move,” said Dow from the University of Melbourne’s Business School. “But there is a danger here that both sides could lose the war because the company has been damaged.”

--With assistance from Phoebe Sedgman in Melbourne, Jacob Greber in Canberra, Lisa Pham and Angus Whitley in Sydney and Steve Rothwell in London. Editors: Neil Denslow, Garry Smith

To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net; Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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