By Narayanan Somasundaram
Qantas said it would lock out all employees from Monday night in a dispute affecting 70,000 passengers and 600 flights on one of the country's biggest travel weekends. The grounding does not affect Qantas' budget airline Jetstar.
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The announcement took passengers and the government by surprise, embarrassing Prime Minister Julia Gillard who was hosting a Commonwealth leaders summit in Perth. Some of those leaders are booked to fly home Sunday with Qantas.
Unions, from pilots to caterers, have taken strike action since September over pay and opposing Qantas plans to cut its soaring costs, as it looks at setting up two new airlines in Asia and cutting back financially draining long-haul flights.
"They are trashing our strategy and our brand. They are deliberately destabilising the company. Customers are now fleeing from us," Qantas Chief Executive Alan Joyce said.
"(The unions) are sticking by impossible claims that are not just to do with pay, but also to do with unions trying to dictate how we run our business," said Joyce, who estimated the latest move would cost the airline A$20 million a day.
The strike is the worst dispute the airline has faced since 2008, when industrial action by engineers cost it A$130 million ($133 million), according to local media.
"I am very concerned about Qantas' future," said Transport Minister Anthony Albanese, adding the government had asked for a special labor tribunal hearing to end the industrial action.
"This will be aimed at both actions by unions and by Qantas management," he said.
The tribunal will hold an urgent meeting Saturday night and if it orders an end to the industrial action Qantas is expected to be flying again Sunday.
"It (the grounding) is partially designed to get the government involved," Australian aviation analyst Tom Ballantyne said on ABC Television. "The airline will be irretrievably damaged if it goes on for more than a month."
Qantas' decision to halt flights comes during one of Australia's busiest travel weekends, with tens thousands traveling to the hugely popular Melbourne Cup horse race on Tuesday, dubbed "the race that stops the nation."
Many passengers were stranded on aircraft waiting to take off Saturday when the grounding announcement was made.
"Alan Joyce is holding a knife to the nation's throat," said Captain Richard Woodward, vice-president of the Australian and International Pilots Association.
"It is straight-up blackmail. I knew he was trying to kill Qantas, but I didn't know he wanted to do it this quickly," he said, adding the Qantas board should sack Joyce.
Virgin Australia said it would accommodate Qantas passengers where possible and was looking at adding more services in response to Qantas grounding its fleet over labor dispute.
Singapore Airlines said it had not increased flights but was monitoring the Qantas situation.
Qantas said key high value domestic bookings on east coast routes are down by a quarter. November international bookings have fallen nearly 10 percent.
"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 only gave his name as Barry, told Sky TV at Melbourne airport after he was stranded.
The airline said the financial impact to date has reached A$68 million and the action is costing Qantas approximately A$15 million per week in lost revenue.
It plans to cut 1,000 jobs and order $9 billion of new Airbus aircraft as part of a make over to salvage the loss making international business.
Aircraft currently in the air would complete the sectors they are operating. However, there will be no further Qantas domestic or international departures anywhere in the world, it said.
(Additional reporting by Michael Perry in Perth, Ed Davies in Sydney, James Grubel in Canberra, Kevin Lim in Singapore, Writing by Rebekah Kebede, Editing by Jonathan Thatcher)