Bloomberg News

Qantas Says ‘Sorry’ With Free Tickets After Fleet Grounding

November 07, 2011

(Updates with comment from Moody’s in 14th paragraph.)

Nov. 7 (Bloomberg) -- Qantas Airways Ltd., Australia’s biggest carrier, offered free flights to apologize to passengers stranded when the fleet was grounded for two days last month during a dispute with labor unions.

Passengers whose journeys were disrupted by the halt are entitled to a free return economy flight within Australia or to New Zealand over a two-year period from Dec. 14, the Sydney- based airline said.

“This ticket offer is one of a range of initiatives we will be launching as a way of saying sorry,” Qantas Chief Executive Officer Alan Joyce said in a statement yesterday. “Throughout the long period of industrial activity we have been acutely aware of the impact on our customers.”

About 80,000 passengers were affected when Qantas grounded 108 aircraft worldwide on Oct. 29 for about 48 hours in an attempt to end strikes. Qantas and its engineers union resumed talks today with industrial relations regulator Fair Work Australia, Peter Somerville, general manager of the Australian Licenced Aircraft Engineers Association, said by telephone.

Fair Work ordered an end to stoppages on Oct. 31, giving the airline and its engineers, long-haul pilots and baggage handlers 21 days to reach a new contract or face binding arbitration.

The disruptions by unions cost Qantas A$68 million ($71 million), the airline has said. The offer of free flights may cost the carrier as much as A$20 million, the Sydney-based Daily Telegraph newspaper reported at the weekend.

Rewarding Loyalty

Qantas has agreed with regulators that customers will be compensated for all reasonable losses arising from the grounding, and will be contacting affected passengers, the airline said.

Joyce said Qantas regretted the inconvenience caused by the dispute and by the grounding in particular.

“Now that no more industrial action can take place and the cloud of further strike action has lifted, we are 100 percent focused on what matters to customers, getting them to their destinations, safely, on time and in comfort, and in rewarding their loyalty to Qantas,” he said.

Further announcements will be made in relation to overseas- based customers and frequent fliers, the airline said.

Qantas fell 0.3 percent to A$1.61 at the close of trading in Sydney. The stock has gained 4.2 percent since the Oct. 29 grounding compared with a 1.8 percent decline for the benchmark S&P/ASX 200 Index.

Collapse in Bookings

Qantas’s offer is part of a bid to retain disgruntled passengers and defend its 90 percent share of the business market from rivals. Virgin Australia, the country’s second- biggest airline, carried an extra 30,000 travelers during the shutdown and that may help it win 20 percent of domestic business passengers before a 2014 goal, Chief Executive Officer John Borghetti told Bloomberg TV last week.

Brisbane-based Virgin today began sales of business class seats on most of its domestic routes to help it win corporate and government travel from Qantas.

The grounding could trigger a credit “nosedive” for Qantas and may damage future bookings, according to Moody’s Investors Service, which has the airline’s Baa2 rating on review for a possible downgrade.

‘Woes at Qantas’

“The woes at Qantas will help Virgin Australia,” Moody’s said in a report today. “The company’s deliberate disruption, with no notice, of travel plans” for tens of thousands of passengers “has hurt its brand for both leisure travelers and the key business segment.”

The grounding of Qantas’s fleet was the only alternative because the labor disputes were causing a slump in sales for the airline, Joyce told an Australian Senate Committee hearing on Nov. 4. Weeks of sporadic strikes caused a “massive” collapse in corporate bookings in October, he said.

Fair Work Australia ordered an end to union actions, barred Qantas from staging a planned lock out and gave both sides 21 days to reach agreement.

Prime Minister Julia Gillard said on Oct. 31 the airline took an “extreme” approach by grounding its fleet. Australians and the tourism industry were “grossly inconvenienced by this high-handed ambush,” Assistant Treasurer Bill Shorten said a day after the grounding.

Qantas engineers and baggage handlers have staged stoppages seeking higher pay and job-security measures. Long-haul pilots have also held protests in a bid to get the same employment conditions whether they fly for Qantas’s namesake carrier or planes from its budget arm Jetstar.

For related News and Information: Qantas income statement: QAN AU <Equity> FA SS <GO> Analyst recommendations: QAN AU <Equity> ANR <GO> Top Australian news: TOP AU <GO>

--With assistance from Benjamin Purvis and Shraysi Tandon in Sydney. Editors: Edward Johnson, Benjamin Purvis

To contact the reporters on this story: Tracy Withers in Wellington at twithers@bloomberg.net; Robert Fenner in Melbourne at rfenner@bloomberg.net

To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net; Paul Tighe at ptighe@bloomberg.net


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