Qantas to resume flights after governmen intervenes

Published October 31, 2011

| Reuters

By Sonali Paul and Narayanan Somasundaram

Australia's Qantas Airways scrambled to get its planes in the air on Monday after grounding its entire fleet over the weekend in a bold tactic to force the government to intervene in the nation's worst labor dispute in a decade.

Qantas took the drastic step to ground all flights on Saturday, disrupting 70,000 passengers and spurring the government and its labor-market regulator to seek a quick end to hostilities between the airline and unions.

At the government's instigation, Australia's labor tribunal ordered Qantas to resume flights and banned trade unions, which have waged a damaging campaign of industrial action, from staging more strikes.

Joyce was dubbed a "kamikaze" by one newspaper for effectively staging his own strike against the unions.

The share market judged him the winner, driving Qantas shares up as much as 7.4 percent. In afternoon trade, the stock settled at A$1.61, up 4.2 percent.

The tribunal ruling, handed down in the early hours of the morning, gives both sides 21 days to settle the dispute or submit to binding arbitration -- an expedited process likely to favor Qantas in its battle with unions to cut costs and base more operations in Asia, a labor-law expert said.

"I think that will give Qantas a victory," said Ron McCallum, professor of industrial law at Sydney University.

Qantas says it has lost about A$70 million ($75 million)since September from industrial action in its dispute with three trade unions over pay, working conditions and its Asian plan. Joyce had described the union campaign as "death by a thousand cuts" for the 90-year-old airline.

The aviation regulator said it would clear Qantas flights to resume from 3pm local time (midnight EDT), though full operations were not expected to be restored until Wednesday.

Despite Qantas's share price rebound, the stock has lost more than a third of its value this year and investors worry about longer-term damage to the brand from the grounding, which disrupted the travel plans of some leaders at the end of a summit of Commonwealth nations in the western city of Perth.

"I will never ever even think of flying Qantas in the future," said Robert Moore in a posting on the airline's Facebook page.

At Singapore airport, an elderly Australian of ethnic Chinese origin hoped to finally board his Qantas flight home, having been stranded over the weekend. "I doubt if I'll ever take Qantas again," he said, declining to be identified.

In Australia, Qantas departure lounges were crammed with passengers hoping to board the first flights. In downtown Sydney, businessman Michael Williams said he felt Joyce might have overplayed his hand. "It's a very Machiavellian move and it'll damage the reputation of Qantas," Williams said.

The grounding also stirred media speculation of Qantas as a potential takeover target, with a Sydney Morning Herald columnist accusing Joyce of driving "Qantas's share price into the ground, making it a sitting duck for a takeover."

Qantas was the target of an aborted private-equity bid four years ago and has continued to draw takeover rumors from time to time, despite a 49 percent limit on foreign ownership.

PM FUMING

The government welcomed the tribunal's ruling, saying it had saved the tourism industry and the wider economy further from serious harm, but it turned its anger on the Qantas CEO.

Prime Minister Julia Gillard said the grounding was an extreme step and criticized Joyce for giving the government only three hours notice before grounding the airline, which carries about a fifth of Australia's international passengers.

Assistant Treasurer Bill Shorten said Joyce had lit a fire beneath Qantas. "It really shouldn't have needed this bushfire, industrial bushfire, to take place," he said.

The Qantas dispute has dragged on for months but escalated recently when the airline announced plans to cut 1,000 jobs and order $9 billion worth of new aircraft as part of a makeover to salvage its loss-making international business.

Union representatives said they would work with Qantas to resume flights as soon as possible but some sought to cast Joyce as a reckless manager prepared to risk the airline.

"The board should immediately sack their out-of-control CEO," said Captain Richard Woodward, vice president of the Australian and International Pilots Association.

Qantas estimated the weekend grounding of the fleet cost it about A$20 million each day, but it said the previous campaign of rolling stoppages by unions had driven down bookings and threatened its survival.

The Qantas dispute is the latest in a tide of industrial unrest as unions press for a greater share of profits amid tight labor markets and high commodity prices.

Australian rival Virgin Australia said earlier it was adding 3,000 seats on its domestic network on Monday, in addition to 3,500 seats on Sunday. Virgin shares were up 5.6 percent on Monday and have outperformed Qantas this year.

Virgin Australia's airline partners Abu Dhabi's Etihad Airways and Air New Zealand said they were looking at options to increase capacity to and within Australia.

The weekend was one of Australia's busiest for travel, with tens of thousands traveling to the hugely popular Melbourne Cup horse race on Tuesday.

($1 = 0.933 Australian dollars)

(Additional reporting by Narayanan Somasundaram, Amy Pyett and Ed Davies in SYDNEY and James Grubel in CANBERRA; Editing by Mark Bendeich and Dean Yates)

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