The QANTAS Industrial Dispute: A Case of Lose – Lose Bargaining

The QANTAS lockdown has grounded 108 planes and cancelled thousands of flights

The recent case of QANTAS suspending all flight operations over the weekend, and issuing a lockout order against staff engaged in a long running industrial dispute is an example of poor leadership and crisis management.  If we remove the political rhetoric that will inevitably flow through this debate and look at the impact of the union led industrial actions of the past few months, and the management response that resulted in the lockout over the weekend, we can see quite clearly the failure of leadership to navigate a clear path through the bargaining process.  There are a couple of issues that I would like to tease out of this industrial dispute, and I am going to attempt to do so without taking a strong perspective on either side of who is right or wrong. I will look at the consequences of the approach to this dispute and perhaps look at what can be learned for the future.

An industrial dispute is in essence a negotiation, and in any negotiation there are always and inevitably issues of conflict that need to be resolved using the issues of cooperation.  Politically this can be framed as a battle between the workers and management, but another way to view this industrial dispute is instead to look at all the actors involved as stakeholders. Everyone involved in this dispute is a stakeholder with a vested interest in the successful resolution of this dispute. The key stakeholders as I see it are; the Management (lead by Alan Joyce), the Board (lead by Leigh Clifford), the shareholders, the workers (represented by a variety of unions), and the flying public, who just want to use their consumer rights to get the service for which they have paid. All of these stakeholders have an interest in this dispute, and yet there really have been only three parties engaged in the discourse of negotiation and bargaining, while the remainder have been collateral damage. The shareholders and the public have been penalised by this event and I will demonstrate how.

Industrial disputes involve a variety of negotiation tactics aimed at achieving a softening of a position to reach a compromise. Traditionally, this has been through claim and counter claim, then strike and sometimes lockout. Most industrial bargaining avoids the highly antagonistic stage of strike and lockout, but it can reach this point, and has done in the case of QANTAS. In today’s society, there is an added challenge of managing the news feed through traditional and instant (Twitter, facebook etc) media, to effect public opinion and community support for either the workers or management. Invariably as in all disputes such as these there will be those in favour of management and those in favour of workers.  The problem for QANTAS in this case is that the public is also the consumer.

Is QANTAS about to fly into the Storm?

In the recent past, since the demise of Ansett, QANTAS has held in most cases around 60-70% of the air traffic in Australia, with Virgin, and the otherfeed in international airlines taking the rest. Most polls demonstrate public opinion of this strike and counter action by QANTAS show that the public is split fairly evenly around 50-50, give or take a few percentage points. Joe Public is angry and many have emphasised their loss of trust in the QANTAS brand, management, and strategy. If these people take up their threat to not use QANTAS again, then QANTAS will see a direct impact of their lockout in perhaps a 10-20% drop in market share.  This is directly due to damage of the brand……this is not however only attributed to the management lockout. It is also attributable to the union strike action.

This industrial dispute is being conducted along the lines normally seen in non-mass consumer industries such as the Patrick Waterfront dispute, heavy industry or mining. In these disputes, the public is not the direct consumer, and so the total damage to the brand is minimal as it relates to the bottom line over time. The difference for QANTAS is that IT IS A MASS CONSUMER BRAND, and so its actions directly affect all of its consumers. Consequently this is a lose-lose bargaining approach from both management and unions which will ultimately result in lower market share, increased competition, lower revenue, increased costs and less jobs. Lose- lose…..and of course lower share price.

QANTAS CEO Alan Joyce

The other key stakeholders that have been abandoned in this argument are the shareholders, due to the cynical actions of the board and management. At the end of last week, the board and management went to the AGM asking for a large pay increase for the CEO; Alan Joyce, and set out the perspective of management on the dispute. I have not read all the transcripts, nor was I present at the meeting, but I have not seen anything to suggest that the Board detailed the likelihood of a lockout.  In terms of corporate governance, I believe this to be appalling. If shareholders had known this action was going to take place, which went from $15million loss a week to $20 million loss a day, would they have granted a pay increase to Joyce? Would they have re-indorsed the board?

Ultimately, this case is an example of poor leadership and management, which may cripple the brand in both the short term and the long term…..the risk now for QANTAS management, is that the arbitration at Fair Work Australia could award greater rights to the workers than QANTAS management would have accepted had they pursued a more conciliatory approach to bargaining. If that occurs, then QANTAS, will have increased their cost burden, and successfully lowered their revenue, and brand value. Whatever the result, QANTAS has seemingly lost the spirit of Australia, and may have lost the consumers of Australia.

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About Nathan H. Gray
Nathan H. Gray is Managing Partner of AsiaAustralis. AsiaAustralis is a stategic consulting service partnership established by experienced international management consultants to assist private and public organisations achieve their strategic objectives in trade, investment and government relations throughout the Australasian region with a particular focus on SE Asia. Based in Adelaide, South Australia, AsiaAustralis has a network of associates throughout Australia and Asia that can be called upon to assist and facilitate major projects, business opportunities and government to government trade and investment facilitation. To Contact AsiaAustralis check out the website: www.asiaaustralis.com or send Nathan an email: nathan@asiaaustralis.com

5 Responses to The QANTAS Industrial Dispute: A Case of Lose – Lose Bargaining

  1. Yes, Nathan, it will be interesting to see what happens. However, Qantas’ problems go back well before the present issues. Under Dixon, Qantas made some very poor procurement decisions mainly not ordering the 777 which left it with outdated and costly equipment to compete against its rivals. Qantas has very limited international routes, generally long and thin,and has been overtaken comprehensively by airlines such as Singapore Airlines with up to 7 flights a day out of Sydney to a hub in Singapore where there are frequent services to much of the world. Clearly Qantas has this in mind in deciding to set up an airline based in Singapore. Only time will tell whether this is too little too late. Other airlines such as Etihad and Emirates have also emerged. No amount of complaining by Qantas or the unions about them being subsidised by their government owners will make a difference. They are cheaper and Australians will fly with them. Qantas clearly saw some of this years ago when it set up Jetstar, and we wondered at the time what would happen when it became established with low cost pilots, maintenance and overheads. Would it take over the rump of the Qantas routes and be rebranded Jetstar, or would Jetstar rebrand as Qantas? One way or another Qantas as we knew it had no future. Both the unions and Qantas are making sure of that,

    Like many others I know, I gave up on Qantas some time ago. Their frequent flyer program, often described as “the jewell in the crown”, is poor. Recently I flew with Singapore from Sydney to Delhi with a stopover in Singapore to visit Indonesia. Out of interest, I tried Qantas. The only flight they were prepared to offer out of Sydney on the day I needed to fly was via Melbourne. (I also checked and there were no seats on offer out of Melbourne that day!). From Singapore to Delhi and return with Qantas I would have had to fly via Hong Kong or Bangkok, with significant points for the extra distance. Whether this all means that Qantas treats its frequent flyers with contempt, as many say, or the route offered demonstrates the limitations of its network is hard to tell. Nonetheless Qantas is in a corner that it may never get out of on its international routes. I wonder when the unions will work it out.

    • Garry, you make some good observations about the longterm viabiity of the Airline. It is a pity that QANTAS management and the Unions seem to think they are operating in a vacum. I too have had tremendous service from carriers such as Singapore airlines. The challenge for QANTAS is to not throw the baby out with the bathwater….which is what they seem to be doing. I shall await the Fair Work Australia Arbitration ruling with excitment…for it shall clearly show whether QANTAS have kicked an own goal.

  2. The moving finger writes and having writ moves on. Qantas is back in the air. A temporary reprieve. But the age of Qantas planes,poor technology for customers, deteriorating variety in and lessening number number of service routes, only partial engagement with certified biofuels for the powering of future flights, etc. all tend in one direction – the need for dramatic change if Qantas is to restore its image and the actuality which will make employees and customers proud to use the airline’s services.

  3. gnatrix says:

    I don’t know very much about whether or not the Qantas brand is in a total mess, however I recently noticed a few changes to one of its competitors, Virgin Australia. It is slowly but surely becoming more and more Qantas-like; the staff uniforms have been upgraded to look more sophisticated, the planes have been re-painted to resemble the Qantas fleet and complementary in-flight gourmet meals come with certain fare types. Alas, even their previously hip inflight announcements have become a bit boring. Is this an attempt to capture the fall out, I wonder?

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