By Lincoln Feast
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Qantas plans to cut 1,000 jobs and order $9 billion of new Airbus aircraft as part of a makeover to salvage its loss-making international business.
The marked escalation in the dispute angered the government and came as an embarrassment for Prime Minister Julia Gillard who was hosting a summit of Commonwealth leaders in the western city of Perth, 17 of them booked to fly out on Sunday with Qantas.
Qantas chief executive Alan Joyce, who estimated the "bold decision, an unbelievable decision" would cost the company A$20 million ($21.4 million) a day, said the special labor tribunal would have to terminate all industrial action before the airline could resume flying.
"We're hoping a determination is made today and that will give us certainty about what we can do and start planning to get the airline back in the air," Joyce told Australia's Sky News on Sunday.
If the Fair Work Australia tribunal ordered termination of industrial action on Sunday, Joyce indicated Qantas could be flying again on Monday.
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Qantas and the unions would then have 21 days to negotiate a settlement before binding arbitration would be imposed. The hearing begins at 0300 GMT.
Executives faced angry shareholders and workers at a shareholders' meeting on Friday where the company said the labor dispute since September had caused a dive in forward bookings and was costing it A$15 million a week. The shareholders backed hefty pay rises to senior Qantas executives.
The Australian and International Pilots Association was flabbergasted at the move to ground the fleet, describing it as "brinkmanship in the extreme."
"Alan Joyce is holding a knife to the nation's throat," said Richard Woodward, vice-president of AIPA.
The action also sparked an angry response from Australia's Transport Minister Anthony Albanese on Saturday.
"I'm extremely disappointed. What's more, I indicated very clearly to Mr Joyce that I was disturbed by the fact that we've had a number of discussions and at no stage has Mr Joyce indicated to me that this was an action under consideration," he said.
Qantas check-in desks across Australia were empty on Sunday morning as customers scrambled for alternative travel arrangements. Australian rival Virgin Blue said it was adding an extra 3,000 seats on its domestic network on Sunday to assist Qantas passengers.
Qantas's decision left many passengers venting their anger.
"To resolve this at the expense of paying customers on one of the biggest flying days in Australia is quite frankly ... bizarre, unwarranted and unfair to the loyal customers that Australia has," a businessman, who gave his name only as Barry, told Sky TV at Melbourne airport.
This weekend is one of Australia's busiest for travel, with tens of thousands traveling to the hugely popular Melbourne Cup horse race on Tuesday, dubbed "the race that stops the nation."
Qantas' Facebook page was inundated with angry passengers. "Stranded in Sydney Airport ... because QANTAS are useless idiots," wrote Lyn Haddon.
At London's Heathrow Airport, passengers stood in long queues looking up at departure boards showing canceled flights.
"(I'm) not very happy because it was the holiday of a lifetime for us and it cost us a lot of money," British passenger Steve Johnson said.
The dispute is the worst Qantas has faced since 2008, when industrial action by engineers cost it A$130 million ($133 million), local media reported.
Shares in the airline have fallen almost 40 percent this year, underperforming the 8 percent fall in the benchmark index.
(Additional reporting by Narayanan Somasundaram and Ed Davies in Sydney, Rebekah Kebede in Perth, James Grubel in Canberra, Kevin Lim in Singapore; Editing by Ralph Gowling)