Bloomberg News

Qantas Resumes Flights as Government Intervenes in Union Strikes

November 03, 2011

Oct. 31 (Bloomberg) -- Qantas Airways Ltd. resumed flights today after Australia’s labor regulator barred strikes that had prompted the nation’s biggest carrier to ground its fleet two days ago, stranding about 80,000 passengers.

The airline jumped as much as 7.4 percent in Sydney trading, the most in two months, after Fair Work Australia granted a government request for a strike ban. Chief Executive Officer Alan Joyce halted flights at his main unit after weeks of sporadic stoppages over pay and job security that cost Qantas A$68 million ($72 million) and caused a plunge in bookings.

The ruling marks a victory for Joyce, 45, whose move to ground the fleet with no notice sparked criticism from Prime Minister Julia Gillard, union leaders, tourism operators and stranded passengers. Joyce is seeking to reverse losses at the Sydney-based carrier’s international operations by setting up new ventures overseas, while also cutting jobs in Australia.

“It’s been a public relations disaster but the status quo for Qantas was not sustainable,” said Matt Williams, who helps manage A$17 billion of assets at Sydney-based Perpetual Ltd. “In the fullness of time, people will be back and they’ll recover from the public relations side of things.”

Qantas recommenced services with a flight from Sydney to Jakarta carrying 88 passengers shortly after 3:40 p.m. local time today after the Civil Aviation Safety Authority approved a resumption, a spokeswoman for the carrier said by telephone, asking not to be named in line with company policy.

The industrial-relations regulator handed down its order at about 2 a.m. in Melbourne, following more than 12 hours of hearings spread over two days. The agency also banned Qantas from locking out workers from three unions.

The decision gives the two sides 21 days to reach agreement. After that, the regulator may extend talks for another 21 days or begin an arbitration process that will impose a resolution.

Extra Flights

The carrier plans to lay on extra staff and flights to help clear a backlog of stranded travelers after canceling at least 450 services since Oct. 29. Qantas’s budget arm Jetstar, regional carrier QantasLink and a unit that flies to New Zealand weren’t affected by the shutdown.

“The only option that we had in response to the union action was to take our own action,” Joyce said today at a televised news conference in Sydney. “The clouds have gone. Qantas will get back to where it was before this activity.”

Virgin Australia

The parent of Virgin Australia, the nation’s No. 2 carrier, also surged as much as 8.3 percent, the most in two months, on speculation the Qantas grounding may threaten the Flying Kangaroo’s grip on the corporate-travel market. The carrier, a unit of Virgin Blue Holdings Ltd., has rebranded itself and abandoned a low-cost strategy to challenge Qantas for business- class traffic.

“This grounding could not have come at a better time” for Virgin, said Robert Bruce, an aviation analyst at CLSA Ltd. in Hong Kong. “In the medium term, corporate procurement departments are more likely to allocate a greater portion to Virgin.” The Brisbane-based carrier was also adding extra flights today.

Joyce halted flights to confront engineers and baggage handlers seeking higher pay and job-security measures. Long-haul pilots have also staged protests in a bid to get the same employment conditions whether they fly for the Qantas-branded unit or Jetstar.

Richard Woodward, vice president of the Australian & International Pilots Association, said that the two sides would meet tomorrow to begin talks. Still, he said he expects Qantas to feel emboldened by the labor ruling, which may dent chances for a compromise.

“I think it will end up in enforced arbitration,” he said.

Singapore Air, Tiger

The Qantas dispute may also help Singapore Airlines Ltd. win long-haul traffic and aid the carrier’s budget arm Tiger Airways Holdings Ltd. in winning back passengers, CLSA’s Bruce said. Tiger’s Australia unit was ordered to halt flights earlier this year because of safety concerns.

“Qantas took an extreme approach,” Gillard said today in a television interview on Channel 7. “It’s a question of the grand inconvenience for passengers and the impact for the national economy that’s concerning me,” she said.

The airline rose 4.3 percent to A$1.612 in Sydney today, compared with a 1.3 percent decline for the country’s benchmark S&P/ASX 200 index. The carrier has declined 37 percent this year.

Qantas has about 65 percent of Australia’s domestic market and less than 20 percent of international travel. Keeping the Qantas unit’s 108 planes out of the skies would have cost A$20 million a day, the airline estimated. The carrier has already lost A$68 million because of labor disputes this year, Joyce said on Oct. 28.

--With assistance from Angus Whitley, Jacob Greber, Edward Johnson and Sarah McDonald in Sydney, Jason Scott in Perth and Jasmine Wang in Hong Kong. Editors: Neil Denslow, Edward Johnson

To contact the reporter on this story: Robert Fenner in Melbourne at rfenner@bloomberg.net

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


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