Qantas boss Alan Joyce nukes customers. 68,000 passengers stranded

In a startlingly 19th Century show of managerial machismo, Qantas CEO Alan Joyce unilaterally grounded its entire fleet of 108 planes across 22 cities in one swoop Saturday 29 October, leaving 68,000 passengers stranded at airports all around the world. 


Joyce decided to force a dramatic showdown by grounding Qantas at short notice and locking out staff from the next workday, Monday 31 October.


"It's an unbelievable decision. It's a hard decision. We have no alternative. This is the fastest way to ensure the airline gets back in the air." Joyce blamed the unions for "trashing our strategy and our brand".


This was a day after he asked the Qantas board for a pay hike for himself, from A$3million to A$5million. The board passed his salary-hike and backed his strategy to nuke employees and passengers. 


But this plan was never disclosed at the annual general meeting on Friday which preceded his dramatic fleet-grounding announcement of Saturday. Deliberate withholding of such information during the AGM, raises issues of transparency and governance for a publicly listed company.


Interestingly on the Monday trade, Qantas share price rose 5% to A$1.62 indicating investors agreed with the need to flush out the attrition tactics of the unions and move on. 


It worked. The government called for an emergency Saturday night sitting of the three-man Fair Work Australia (FWA) panel to decide termination or suspension of industrial action and grounding of the fleet, to push the parties back to the negotiating table.


The FWA panel ordered immediate termination of all strikes and grounding of the fleet. It decreed a 21-day window for the three unions involved and Qantas management to agree terms, failing which the government would intervene to force resolution.


Qantas International in the red A$200million annually


The international operations pile up huge losses but are subsidized by the highly profitable domestic subsidiary Jetstar Airlines and the freight hauling arm.


Therein lies the secret to the Qantas makeover: Jetstar operates with a substantially New Zealand recruited crew paid in NZ currency, following local NZ terms and scales which are significantly less than Australian benchmarks. 


It follows the low-cost, low-fare, no-frill formula. It gets passengers from A to B without fuss. It outsources pilots and cabin crew at ex-Australia rates.


In August Alan Joyce had announced that the carrier plans to shed 1,000 jobs. It will establish two new brands, both based in Asia, as budget carriers using foreign crew and pilots. The strategy was to replicate the Jetstar success to gradually replace the loss-making Qantas International. 


This unveiling of the new strategy was announced together with a more than doubling of net profits to A$250million for the group.



The unions could see the writing on the wall: jobs would migrate overseas, salary leverage would shrink and the centre-of-gravity of Qantas manning would shift offshore.


So naturally the unions of the aircraft mechanics (ALAEA), baggage handlers (TWU) and pilots (AIPA) challenged the strategy because it fundamentally displaces them. 


In furtherance of their self-preservation cause they undertook rolling work disruptions as a negotiating tactic in the hope of winning pay rises and assurances of job security.


Alan Joyce persuaded the Qantas board that there was more in it for the shareholders to go with his scheme. They agreed, backed his fight and upped his reward to make it happen. Is that not the story of capitalism, free markets and globalization?


Political nexus of Labour Government & Unions


The Labour Government was blind-sided by the speed of Alan Joyce's strike. Transport Minister Anthony Albanese was riled by the Qantas grounding decision "made on a Saturday morning with notice to the Government mid-afternoon one day after the AGM." 


"This is a startling over-reaction" declared Richard Woodward, Vice-President of the Australian & International Pilots Association (AIPA). "The board should move to sack Mr Joyce immediately. He played out his tough-guy fantasies on the passengers!"


Tony Sheldon, national secretary of the Transport Workers Union (TWU) which represents baggage handlers and ground crew, is standing for leadership of the Labour Party along with six other contenders, at the national party conference 2nd December.


The Gillard Government replaced the Industrial Relations Commission with Fair Work Australia (FWA) after passing The Fair Work Act 2009. Of the eleven Fair Work Commissioners appointed by the Gillard administration, nine are former union officials and two are career bureaucrats.


Amazing contempt for customers. Not the Harvard playbook.


There can be no more self-destructive business decision than victimizing your own customers. Alan Joyce ensured maximum inconvenience to unsuspecting Qantas passengers. They were suddenly left stranded at domestic and international airports without a plan. They were scammed by their own national airline.


That will not be forgotten nor forgiven easily. The brand equity which the world's tenth largest airline built over decades of reliability has been trashed by its own CEO.


Perhaps that was his plan. He is a mathematician by academic training. He may have a calculus of net benefit all worked out. After all people are mere 'factors of production' in the economic equation. What matters is greater profits for the haves.


ENDS