Bloomberg News

Qantas May Face Six Month Arbitration for New Union Contract

November 23, 2011

(Updates with closing share price in fifth paragraph.)

Nov. 22 (Bloomberg) -- Qantas Airways Ltd., the Australian carrier that grounded planes last month to force an end to strikes by labor unions, may face six months of arbitration to resolve the disputes after talks broke down.

Fair Work Australia, the nation’s labor regulator, will hear evidence from the airline, long-haul pilots, ground crew and engineers before making a binding decision on new contracts, which typically last for three years.

“We’ve got a fairly complicated agreement and there’s a lot of expert witnesses we’ve got to bring in,” Barry Jackson, president of the Australian & International Pilots Association, said today in an interview with Susan Li on Bloomberg Television’s “First Up.” “It could take six months. I think both sides have an element of risk.”

Qantas Chief Executive Officer Alan Joyce ceded control of negotiations in the hope of winning a more favorable deal from the regulator than he could get from unions. Joyce put the disputes on a path toward an imposed resolution on Oct. 29, when he grounded his main fleet and planned to lock out workers in a bid to halt six months of sporadic strikes that he said had caused a plunge in bookings. The regulator’s three-week deadline for the sides to reach agreement expired yesterday.

Qantas fell 4.3 percent, the most in more than a month, to A$1.57 at the close of Sydney trading. The stock has dropped 38 percent this year compared with a 13 percent decline in the benchmark S&P/ASX 200 index.

Union Demands

Baggage handlers and engineers are seeking higher pay and job-security measures, such as forcing the airline to commit to maintenance in Australia for new aircraft and restrictions on the use of contract workers. The long-haul pilots want the same employment conditions whether they fly for Qantas’s namesake carrier or its budget arm, Jetstar.

Qantas is planning to establish two minority-owned carriers in Asia next year, including a Jetstar budget unit in Japan and a full-service business based in Singapore or Malaysia, as part of Joyce’s strategy to turn around A$200 million ($198 million) of annual losses from international operations.

The regulator is unlikely to back any union conditions that would limit Qantas’s ability to create the new airlines, said Russell Shaw, an analyst at Macquarie Group Ltd.

“We would be surprised if any of the arbitrated decisions put operational constraints on the business,” Shaw wrote in a report to clients, affirming an “outperform” rating on the stock. “We view a favorable arbitrated outcome as likely.”

Increasing Strikes

The dispute comes amid increasing strike action in Australia that has also affected Toyota Motor Corp., BHP Billiton Plc and port operator Asciano Ltd. The number of days lost to industrial disputes tripled in the three months ended June 30, according to the most recent government data.

“All parties would have been better reaching a negotiated settlement as that would have helped the process of rebuilding trust,” Workplace Relations Minister Chris Evans said in an interview on Bloomberg Television. “They were very close on many matters. The major issue at stake for the trade unions is the issue of job security.”

Qantas said it has held more than 50 meetings with pilots on a new contract and has had six months of talks with the Transport Workers Union, which represents ground crew and baggage handlers.

--With assistance from Shraysi Tandon in Sydney and Terje Langeland in Tokyo. Editors: Edward Johnson, Andrew Hobbs

To contact the reporters on this story: Robert Fenner in Melbourne at 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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