Qantas to Resume Flights as Regulator Blocks Strikes

By Robert Fenner - Oct 31, 2011 6:54 AM GMT+0700

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Oct. 31 (Bloomberg) -- Richard Woodward, vice president of the Australian and International Pilots Association, talks about labor disputes at Qantas Airways Ltd. Qantas plans to resume flights as early as today after Australia's labor regulator barred work stoppages that had prompted the nation’s biggest carrier to ground its fleet, stranding about 80,000 passengers. Woodward speaks from Sydney with Susan Li on Bloomberg Television's "First Up."(Source: Bloomberg)

Qantas Airways Ltd. plans to resume flights as early as today after Australia's labor regulator barred work stoppages that had prompted the nation’s biggest carrier to ground its fleet, stranding about 80,000 passengers.

Fair Work Australia handed down the order at about 2 a.m. in Melbourne, following more than 12 hours of hearings spread over two days. The ruling, which paves the way for binding arbitration, was opposed by unions who were instead seeking a temporary halt to stoppages.

“The only option that we had in response to the union action was to take our own action,” Chief Executive Officer Alan Joyce said today at a televised news conference in Sydney, adding that passengers can now book flights without the threat of future strikes. “The clouds have gone. Qantas will get back to where it was before this activity.”

Joyce grounded the carrier’s main unit with no notice Oct. 29 after weeks of sporadic strikes disrupted flights and caused sales to plunge. Keeping the 108 planes out of the skies would have cost A$20 million ($21 million) a day, the airline estimated, and bolstered Virgin Australia’s attempts to break Qantas’s grip on the lucrative corporate travel market.

“It’s been a public relations disaster but the status quo for Qantas was not sustainable,” said Matt Williams, who helps manage A$17 billion of assets at Sydney-based Perpetual Ltd. “The share price was telling you how tough it is. In the fullness of time, people will be back and they’ll recover from the public relations side of things.”

Binding Arbitration

Qantas shares rose 4.9 percent to A$1.62 as of 10:49 a.m. in Sydney, the biggest advance since Oct. 6, paring their decline this year to 36 percent. Virgin Blue Holdings Ltd., Virgin Australia’s parent, jumped 6.9 percent to 38.5 cents and the country’s benchmark S&P/ASX 200 index dropped 0.6 percent.

Sydney-based Qantas plans to add supplementary flights to clear the backlog of customers and expects to return to “business as usual” over the next 24 hours, according to a regulatory filing today.

The labor regulator may wait 21 days or 42 days before imposing binding arbitration, Justice Geoffrey Giudice said at the hearing. The agency also banned Qantas from starting a lockout against three unions that was set for 8 p.m.

Joyce halted flights to confront engineers and baggage handlers seeking higher pay and job-security measures. Long-haul pilots have also staged protests in a bid to get the same employment conditions whether they fly for the Qantas-branded unit or budget arm Jetstar. The low-cost subsidiary, regional carrier QantasLink and a carrier that flies to New Zealand weren’t affected by the grounding.

‘Extreme Approach’

“Qantas took an extreme approach,” Prime Minister Julia Gillard said today in a television interview on Channel 7. The airline “had other options available to it on Saturday than grounding planes without any effective notice to passengers. It’s a question of the grand inconvenience for passengers and the impact for the national economy that’s concerning me,” she said.

The unions have stepped up action since Joyce announced plans in August to eliminate 1,000 jobs, reduce routes and establish new ventures in Southeast Asia and Japan in a bid to end losses at international operations. Stoppages have cost the carrier A$68 million this year and caused bookings to “dive,” Joyce said Oct. 28.

Qantas has about 65 percent of Australia’s domestic market and less than 20 percent of international travel. Separately, Air France has also canceled flights in Europe because of a strike by cabin crew.

Virgin Australia

Virgin Australia, the nation’s No. 2 carrier, has added extra flights to help stranded Qantas passengers, including plans for an additional 3,000 seats today. Partners Singapore Airline Ltd., Etihad Airways and Air New Zealand Ltd. may also add services, Virgin said on its website. Jetstar was also working on adding flights.

The dispute may help Singapore Air Ltd. win long-haul traffic from Australia and aid the carrier’s budget arm Tiger Airways Holdings Ltd. in winning back passengers after its Australia unit was ordered to halt flights earlier this year because of safety concerns, said Robert Bruce, an aviation analyst at CLSA Ltd. in Hong Kong. Virgin Australia is also trying to lure business travelers after rebranding itself from a budget carrier.

“This grounding could not have come at a better time” for Virgin, Bruce said. “In the medium term, corporate procurement departments are more likely to allocate a greater portion to Virgin.”

Passengers affected by the grounding included 17 heads of state and other delegates attending an inter-governmental conference in Perth. Most of the heads of state had arranged alternative travel home by yesterday, Australian Prime Minister Gillard said.

To contact the reporter on this story: Robert Fenner in Melbourne at rfenner@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net