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August 13, 2012


FAIR Work Australia’s monumental rebuff to the Transport Workers Union in its dispute with Qantas strikes a blow to the credibility of claims the Fair Work Act is some kind of conspiracy against employers.

The commission (which is what Fair Work Australia is in all but name) had no choice last week but to support Qantas management because, in both its tactics and its demands, the union was being so bloody-minded.

That’s true even though, by grounding its planes worldwide and locking out all its staff last October, Qantas management could come up with no more creative solution to its bargaining problem than to be as bloody-minded as some of its unions.

This was not so much a win for ”managers’ right to manage” as the commission’s commonsense judgment that allthe industrial parties needed to face up to the harsh commercial realities threatening the survival of their business.

Here we had a union demanding 5 per cent annual pay rises at the same time it was fighting to prevent its employer from turning to cheaper sources of labour. That makes sense?

It will be a pity if the commission’s refusal last week to split the difference in the old way encourages other militant employers to seek to resolve disagreements with their workers the chaos-causing Qantas way. Even so, the commission’s refusal to go anywhere near splitting the difference provides powerful evidence it can be trusted to adjudicate issues sensibly in a system that hasn’t swung the balance too far the unions’ way.

Perhaps this explains why the national dailies – which, in their campaigning against the evils of Fair Work, seem to find another story about union atrocities for the front page most days – were not excited by the employers’ big win last week.

Read too much of their stuff and you come away thinking the union movement has risen from its death bed to pose the greatest threat to our continued prosperity. Remember, union membership is down to 18 per cent of the workforce (from 50 per cent in 1982) and 14 per cent of private-sector workers.

Another figure to keep in mind when you read about the union monster poised to eat the economy’s lunch: more than 80 per cent of enterprises don’t have a union presence.

Two labour lawyers, Dr Anthony Forsyth, of Monash University, and Professor Andrew Stewart, of Adelaide University, note in their submission to the Fair Work review that ”the concerns about union activities that so animate certain employers in the resources, manufacturing and construction sectors are very far removed from the issues confronting businesses in other parts of the economy”.

”For the small to medium enterprises that predominate in sectors such as retail and hospitality, both unions and, indeed, collective bargaining are largely absent. Their concerns are much more likely, in our experience, to revolve around the costs and ‘inflexibilities’ imposed by the award system, and the renewed exposure to unfair dismissal claims that the Fair Work Act has brought.”

So far, Fair Work has failed in its aim to greatly increase the extent of collective bargaining, with the proportion of employees covered by collective agreements increasing from 39.8 per cent of the workforce in 2008, to just 43.4 per cent in 2010.

Dr Forsyth and Professor Stewart argue many of these new agreements are effectively non-union instruments drafted by employers to replace the individual workplace agreements formerly available under Work Choices.

Genuine collective bargaining is likely to be confined mainly to large, unionised workplaces in the public sector and to some sections of the private sector.

Much of the bitter complaint about Fair Work comes from the miners. The labour lawyers say what some employers in the resources sector are seeking is a capacity to manage their businesses without the involvement of unions, and to undertake projects entirely free of any threat of industrial action.

‘These aspirations are simply not compatible with the principle of freedom of association … Indeed, to allow them to be fully realised would involve restrictions on the taking of industrial action, or on union rights of entry, that would go far beyond anything envisaged by the Howard government, even during the Work Choices period,” they say.

Talk of Fair Work having unnecessarily bolstered ”union power” should not only be kept in proportion but understood in the context of a broader ideological agenda that is profoundly antithetical to the principle of collectivism, they conclude.

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Qantas flies into the perfect storm

June 6, 2012

Alan JoyceAlan Joyce Photo: Reuters

Joyce’s only strategy left is to turn the international division around – but the odds are stacked.

QANTAS boss Alan Joyce is a man under extreme pressure. Not only is he presiding over a company that has plunged to its first loss since joining the sharemarket 17 years ago – and whose share price dived almost 19 per cent yesterday – his options to rescue the company are as harsh and difficult as they are limited.

And to make matters worse, the plan he outlined last year to revive the troubled international operations of the Qantas business will need to show some signs of gaining traction next year or the market will be calling for his blood.

The dilemma for Joyce is that in the commercial world there is always an expectation of a quick fix. And when it comes to restoring the fortunes of Qantas’ loss-making international operations, there is no immediate remedy.

He outlined a four-pillar strategy last year that would take several years to execute. To date – or at least on the numbers he delivered yesterday – the trouble child among the Qantas brands has become even more troublesome.

This is not Joyce’s fault. The fuel price and the European economic meltdown are issues well outside his control.

The pressures on the better-behaving Qantas domestic and Jetstar operations are more within his control and he will be more accountable for the way these perform in the near and medium term.

Joyce has tied his right to lead to the way the international business performs over the next few years. And there will be an expectation that the building blocks for recovery that he has announced will deliver some gains next year.

Ultimately, he will need to bring this aviation troublemaker to break-even point.

Whether he needs to have it return cost of capital is another matter entirely. He says this is the objective, but it may never be achievable on a sustainable basis.

Qantas international’s profit performance has a history of gyrating wildly, depending on external conditions.

At the earnings-before-interest-and-tax line, Qantas international will lose $450 million this year.

This poses the question of why Qantas needs to run this operation at all. Its current market share runs at about 17 per cent and has often been a thorn in the group’s side in terms of brand perception.

The rationale, as explained by Joyce, is that despite its stand-alone losses, it is a fundamental part of the wider network as it provides feeder traffic into the domestic operations.

But with 17 per cent of the market, why bother to keep this loss-making feeder alive? Surely it costs more than the financial benefit it gives to Qantas’ domestic operations.

According to Joyce, the calculation is not that clean.

While Qantas international has a relatively small market share overall, its share of the premium market is significantly larger. The business, or premium, market is the nirvana for all operators as it is the high-yielding end.

Not only do premium domestic customers want to be able to use their frequent-flyer points on international flights, they also want to use their international points for domestic flights.

Thus the highly profitable frequent-flyer division and the domestic premium Qantas brand both need the sustenance of Qantas international.

On top of this, there is a bigger wrinkle. Joyce may consider this the counter-factual dilemma.

If the company was of a mind to get rid of the Qantas international business, it has three options – sell it, sell part of it or close it down.

There is nothing stopping Qantas from forming some kind of joint venture with its international division and another airline via third-party equity. The recent internal splitting of Qantas domestic and international has put the first block in place. This has clearly been investigated and potential partners have been mooted. Most recently a tie-up with Emirates has been bandied about.

But selling it outright is a near impossibility because the Qantas Sale Act would not allow a foreign owner.

Closing down the division has more dire consequences. It’s a $5 billion business with liabilities including debt and 10,000 employees who would have to be paid out.

”We have looked at every strategy under the sun,” Joyce said. And the only conclusion is to turn the business around.

Still, it is a tall order.

International carriers continue to eat Qantas international’s lunch – the latest of which is China Southern, which has entered what is now called the Canton route to Europe via China.

The increasing invasion by foreign and often government-owned airlines of the Australian market means that the goalposts continue to shift for Joyce and Qantas.

There are many who blame the Qantas board and management (past and present) and their service and fleet strategies for the pickle in which the company finds itself.

There is no doubt that mistakes have been made.

But the present reality is that Qantas is pursuing a turnaround strategy for its international business with one hand tied behind its back.

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Interesting how Qantas management have already teed up an arrangement with the WA mining companies….is this suggestive of (i) a heightened degree of planning by management in the leadup to a layoff announcement; (ii) an awareness of the need to manage the media fallout as much as the employee fallout; (iii) an attempt by an employer to do the right thing?


Qantas is set to axe hundreds of jobs in Tullamarine and Avalon. Picture: Mark Smith Source: HWT Image Library

 Related Coverage

QANTAS is set to axe 400 Victorian employees working in its heavy maintenance base at Tullamarine while another 660 are at risk at Avalon.

The Herald Sun said a review conducted by the airline concluded that the division at Tullamarine could not be saved and must close within months. (subscription content)

It also found that Avalon, near Geelong, was not viable beyond two years without major state government investment.

The paper says the Tullamarine workers will be offered mining jobs in Western Australia during a careers information session at the hangar.

If the sackings go ahead it will continue a horror run of job losses in Victoria which include 350 jobs at Toyota, 50 workers sacked at rail operator Metro and, in March, Murray Goulburn Co-operative slashing 60 jobs by closing its milk powder drying operation.

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