Bloomberg News

Qantas CEO Tells Lawmakers Grounding Was ‘Only Alternative’

November 07, 2011

(Updates with closing share price in seventh paragraph.)

Nov. 4 (Bloomberg) -- Qantas Airways Ltd. Chief Executive Officer Alan Joyce told Australian lawmakers that he had to ground the carrier’s main unit because labor disputes were causing a slump in corporate sales.

“The only alternative to me was to bring things to a head,” Joyce told an Australian Senate committee hearing in Canberra today. Weeks of sporadic strikes had caused a “massive collapse” in corporate bookings for October, he said.

Joyce, 45, testified for about three hours, almost double the scheduled time, as he was probed on the decision to halt flights at no notice on Oct. 29, stranding about 80,000 passengers. Services resumed two days later after the nation’s industrial regulator ordered an end to union actions and barred Qantas from staging a planned lockout.

Joyce said he ordered the grounding the day it came into effect and before he had sought backing from directors. Members of the carrier’s own communications department were forced to book flights to Sydney from Melbourne on rival Virgin Australia after being caught out by the grounding, he said.

“That was my decision absolutely,” Joyce said. He grounded the main flying unit because of disputes with pilots, engineers and baggage handlers. Budget arm Jetstar and two other units weren’t affected.

Fair Work Australia, the nation’s labor regulator, ordered both sides to end the dispute and gave them until Nov. 21 to agree to new contracts or face the possibility of compulsory arbitration.

Qantas rose 2.5 percent to A$1.615 at the close of Sydney trading. The carrier has risen 4.5 percent this week, compared with a 1.7 percent decline for the benchmark S&P/ASX 200 Index.

Qantas Ownership

The hearing focused on a proposal to amend legislation governing ownership of Qantas, which was privatized in 1995. The Qantas Sale Act requires the airline to remain majority Australian-owned, as well as maintaining its headquarters and most operations in the country.

The amendment could affect how overseas-based cabin crews are paid and may limit the company’s plans to set up new low- cost ventures in Japan and Southeast Asia as part of a goal to turn around A$200 million ($208 million) of annual losses from international operations.

Unions have pushed for changes to toughen up the law as Joyce looks to start the new carriers. Neither the government nor the main opposition party has publicly backed changes to the ownership rules.

Qantas said the proposed bill could force a breakup of the company, as it would make it harder to operate the new carriers as well as the Jetstar Asia budget venture based in Singapore.

“This legislation would have significant repercussions for all Australian companies seeking to do business and compete internationally,” Joyce said. “The bill being proposed would not do more to protect Australia’s Qantas.”

Joyce said the company has never considered a breakup or closure of its unprofitable international operation.

--Editors: Neil Denslow, Vipin Nair

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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