Qantas Dispute

On October 22nd, 2001, the Industrial dispute between QANTAS and its employees was initiated with the offering of a new Enterprise Bargaining Agreement. This proposed an 18-month wage freeze for employees plus a sliding scale profit share scheme. Ten out of twelve unions under QANTAS accepted the terms of the agreement, barring the unions of manufacturing employees (AWU and AMWU). They were holding out for a 4-6% pay rise. On the 8th May 2002, some ten months later, the dispute was resolved when QANTAS agreed to an across the board 6% pay increase. This essay provides an in-depth analysis into the dispute, including causes, the resolution process, the role of stakeholders, and costs and benefits for all concerned.

The industrial dispute occurred primarily because of two reasons, wage demands, and management policy. In both areas of conflict, there was contradiction between the aims of QANTAS management and manufacturing employees.

The wage demands occurred as a conflict between two major stakeholders, employees and employers, as established in both plural and radical views on conflict. QANTAS proposed that all employees accept an 18-month wage freeze, in order to obtain bonus levels if profit margins reach certain targets. They believed that this was in their best interests as the business had the goal of minimising costs in order to maintain international competitiveness. Competitors were entering the market with lower cost structures, which QANTAS could not match, so they had to reduce costs, which in this case was wages. They justified their cause with the fact that 83% of Unions accepted this. The manufacturing employees, on the other hand, wanted to maximise their wages. In this case, they wished only to maintain wage levels, demanding a 4 to 6% increase in wage levels in order to match the increase in cost of living. They argued that QANTAS was unfairly asking them to take a pay cut, as they were highly skilled workers and the poorest paid.

The second cause of the dispute was less significant although still important – management policy. QANTAS had already outsourced three Boeing 767 planes to Singapore for maintenance and proposed outsourcing another seven, costing $14m. The Unions opposed this, contending that QANTAS was exploiting cheap overseas labour and consequently getting lower quality work

These were the two causes of the industrial dispute, which provoked fierce negotiations as well actions over the next ten months.

Both parties believed they had a legitimate case, and neither would budge from their original demand. The conflict would advance through four main stages over the course of its settlement – the negotiation stage, mediation, industrial action is taken, and then conciliation. The process took place within the confines of the law, in particular the Workplace Relations Act 1996.

The first stage – negotiation – is the beginning of the conflict. After QANTAS management proposed the new agreement, and staff discarded it, they began bargaining for a settlement. At this stage, external bodies cannot interfere, apart from the Unions who negotiate on behalf of employees. Negotiations eventually escalated until the CEO of the QANTAS became involved. Under the WRA 1996, this is where the main responsibility for settling the dispute lies. After it became clear that the vehement negotiations would not produce a resolution, both sides began using more extreme methods.

The first use of Industrial action by Unions occurred on the 12th November 2001, when workers held a 48-hour strike, followed by rolling stoppages and work bans. On more than ten occasions after that day, Unions conducted overt industrial action. This included strikes, work bans, rolling stoppages, overtime bans, workers walking off the job, snap strikes, picket lines blocking the entrance to Melbourne Airport, and employees marching on QANTAS’ domestic terminal. QANTAS responded with overt industrial action of their own on the 1st February by standing down 400 maintenance employees for refusing to work overtime. Industrial action escalated tensions between the two parties, and it continued throughout the entire process.

Under such circumstances, the AIRC is not permitted by the WRA to mediate, unless the industry is nationally significant. This allowed the body to interfere in this case. The Unions requested the AIRC to be further involved through arbitration, however QANTAS management refused this motion. They were even refusing to attend negotiations, unless the threat of industrial actions was removed. An example of the AIRC attempting to resolve the dispute occurred on 11th December 2001, when they recommended that unions take QANTAS’ latest offer to employees. It was overwhelmingly rejected.

The Federal Court also became involved in the dispute when Unions sought Common Law Action to halt the standing down of manufacturing workers, however QANTAS was allowed a 72-hour adjournment.

The AIRC tried facilitated the dispute through conciliation, i.e. by conducting meetings with both employees and management in attendance. On the 8th May, the dispute was resolved with employees obtaining a 6% across-the-board pay rise (although 1/3 employees voted to reject this deal as well).

The employees and management were the primary stakeholders in the dispute and hence were most affected, but they were not the only stakeholders who had a role in it. The Trade Unions (Australian Manufacturing Workers Union and Australian Workers Union), Federal Court and AIRC also had various functions in the dispute which affected the outcome.

The employees, in particular manufacturing personnel, were at the heart of the grievance, and took an extremely hard-line approach when dealing with QANTAS. They refused a wage freeze, claiming that a wage freeze would equal a pay cut in terms of the increasing costs of living (inflation), and they were prepared to hold out till they got a 6% pay increase. They heavily supported all union industrial overt action, including picket lines, strikes, and overtime bans. On the other hand, they twice rejected deals made between their Unions and QANTAS management, which prolonged the process, in order to get what they wanted.

The employers – QANTAS’ management staff – were the opposition to employees in the dispute, and similarly took a hard-line stance. They argued that their proposal was in the best interests of the company in the challenging environment of the post-September 11 airline industry. The new budget airline would also require labour flexibility in order to compete with other companies who had entered the Australian market with lower cost structures than QANTAS. The fact that ten unions had already accepted the proposal strengthened their bargaining power and thus they refused to budge from those agreements. Employers also used overt industrial action in standing down workers who refused to work overtime. They also refused to take the matter to be arbitrated by the AIRC, which extended the time taken to resolve the dispute.

Trade Unions – AWU and AMWU – role in the dispute involved representing unionised employees in all negotiations. The Unions argued that QANTAS was trying to capitalise on the collapse of Ansett, which gave it almost a monopoly over the domestic market. They were openly critical of QANTAS during the negotiation period, particularly of their plans to outsource maintenance to cheap, low-quality foreign workers. Their role was critical to the negotiation process, as they organised industrial action for the workers, represented employees at both the AIRC and Federal Tribunal, and negotiated the new Agreement with QANTAS.

The Federal Government had two roles in the resolution of this dispute. They established the rules and bodies by which all industrial disputes are resolved, including this one. They also played a more direct role when employees took QANTAS to court seeking an injunction to prevent the further sacking of maintenance workers. The Court set up an environment in which negotiations could continue by granting a 72hr adjournment in which negotiations must resume.

The final body with a role in the dispute was the AIRC. The official roles, which were put into practice in this incident, were to facilitate agreement between employees and employers, and to settle an industrial dispute by conciliation. They could not force QANTAS to go to arbitration so that power was not used.

These stakeholders were all affected by the industrial dispute, as were other external stakeholders e.g. consumers. Although many of the costs and benefits cannot be accurately measures in dollar terms, one can identify that the costs and benefits to a number of stakeholders was particularly high as a result of this conflict. There are a number of different types of costs and benefits, and each impacts on stakeholders in a unique way.

The financial impacts of the conflict were severe, particularly because of industrial action. The loss of production incurred by QANTAS, as a consequence of overt industrial action, was estimated at one point to be over $1 million. This does not include the possibility of unknown industrial actions, which slow productivity, and hence cost the employer. Industrial action also costs employees financially, as wages, which would have been earned while working, are given up. QANTAS also had to pay increased wages of over 6% to all employees, adding further to the cost. When the dispute was taken to the Industrial Tribunals and the Federal Court, both the Unions and employers would be forced to pay legal fees e.g. lawyers, another substantial cost.

These are the known financial costs only, which does not include increased administrative costs to deal with disputes, loss of market share if consumers switch companies as a result of unreliability, costs in increased absenteeism etc. These may also have been incurred by the business, unidentifiably. Yet it was not all loss – there were financial benefits as well. QANTAS was able to cut costs marginally, through the outsourcing of labour and wage pause. Employees received the main financial benefits, with their wages rising by at least 6%, however with the reclassifications of job gradings, most employees received more than this. Yet it could be confidently said that financially, costs outweighed benefits.

Non-economic costs and benefits must also be considered when assessing the industrial conflict, particularly from a personal and social perspective. While these are difficult to identify, they are crucial to the future situation of the business. Stakeholders on both sides undoubtedly experienced tension and stress, and if these feelings were not resolved, it could lead to job dissatisfaction, low morale, a breakdown in communication, and an overall reduction in the effectiveness of management. This could lead to social problems, including such things as a breakdown of home life, increased violence etc. This cannot be identified in a particular case but it could have possibly been a result. Bitter anger can be created in situations where the community is affected, and in this case the community somewhat resented the striking unions because it affected them.

On the other hand, if managed well, the conflict could lead to an outlet for tensions and dissatisfaction to be released and brought to the attention of managers, as was the case with the proposed outsourcing of labour. The conflict could have other spillover benefits, such as improved employee morale, which could lead to higher productivity, reduced labour turnover and absenteeism, improved career opportunities etc. It is uncertain whether the QANTAS industrial dispute created these benefits/costs as they are not easily identified.

Furthermore, the industrial dispute had political and international consequences, which must also be considered. The reputations of the Trade Unions involved were no doubt marred by the overwhelming rejection of the first two deals it prepared. Their influence has no doubt been undermined, as well as that of the AIRC, who had little power to resolve the dispute efficiently, without consensus from both parties. Consequently, public opinion of these institutions may be diminished. Internationally, the cost cutting measures, which have been permitted for the low-budget Australian Airlines, will increase the international competitiveness of the company, allowing it to expand internationally. This has the potential to increase profits substantially, which could increase employment and so on. On the other hand, the financial costs discussed previously undoubtedly reduced the competitiveness of the Airline, which could reduce its market share, profits, employment and so on. It is uncertain which of these effects will come into the equation for this scenario.

To conclude, the bitter QANTAS Industrial dispute between management and employees had immense and widespread aftereffects on all stakeholders in the nationally significant industries. The conflict, which lasted 10 months as a result of pay disputes and conflict over management policy, involved a number of stakeholders directly but adversely affected a significant proportion more. But the conflict was not all in vain, and the benefits can exceed the costs, if it is (was) effectively consolidated and managed further down the track.