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QANTAS SHOWDOWN October 31, 2011

Posted by wmmbb in Australian Politics, Social Environment.

Grounding the former national airline carrier and stranding tens of thousands of passengers worldwide has to be one of the extraordinary management decisions of all time.

One supposes and hopes that such decisions are not made on the spur of the moment and are part of a long term strategic vision. Presumably, the immediate short term trashing of the Qantas brand, will be, or it is hoped, negated by the longer term benefits to customers and shareholders. The assumption has to be that this decision has been made by the Qantas board, and not simply the chief executive.

On one level the decision is economic vandalism crudely benefiting the one percent as the expense of everybody else. If the labor relations were fraught within Qantas

before, now they must be damaged beyond repair.

Danny John at The Sydney Morning Herald reports:

There was already a fair amount of suspicion about Joyce’s agenda and his motives when he took over from the long-serving Geoff Dixon, having set up the low-cost offshoot, Jetstar, which not only undercut Qantas’ rivals but also the long term position of its parent airline.

While the success of Jetstar earnt Joyce plaudits at the highest levels of Qantas and secured him the top job, it has come at the expense of a warm working relationship within the company.

His efforts to first take his employees with him, then cajole them and now force them has only gone to reinforce attitudes that Joyce has little understanding for the Australian sense of fair play and partnership.

Given his Irish background and Australia’s deep cultural links with his home country, that may seem surprising to many but Joyce has never been one for emotion or, for that matter, dwelling on the past.

To that end, his willingness to play hardball with the future of the most iconic of Australian companies has been interpreted as a sign that he doesn’t fully appreciate or truly understand what Qantas means to the country: that is an institution, part of Australia’s fabric, rather than just another company.

Joyce would hotly dispute that view and has argued that if Qantas is to survive and retain its affectionate place in Australian society the airline has to be dramatically changed from within.

From Joyce’s perspective that means saving Qantas from itself but to his opponents both inside and outside of the company the chief executive is being seen as more of a destroyer rather than a saviour.

Such polarised positions do not, therefore, bode well for the future of the Flying Kangaroo but given the increasingly ill-tempered nature of this dispute nobody should be surprised that it has come to this.

ABC News Online reports that “furious passengers around the world have vowed never again to fly Qantas”. So it seems the Qantas Board has decided that in order to beat the unions they have had to destroy the airline. The implicit justification seems to evoke the line from the Vietnam War, ” We had to destroy the village in order to save it”. If so, this outcome is an extraordinary development for an industrial dispute, and suggests at the very least managerial arrogance. The link between this behavior and financialization of corporations has not yet been described.


Informed differences of opinions are in progress at: Larvatus Prodeo (and Open Thread) and John Quiggin.


 The industrial tribunal, Fair Work Australia, after a marathon sitting ordered Qantas to resume worldwide operations. ABC Online News reports the decision was made at 2am. After a closure of this magnitude, getting the system back into full working order will take time. Management, at enormous cost, has succeeded in stopping the industrial actions for the time being. Yet the question remains, given the costs, including the trashing of the Qantas brand and the damage to the Australian economy, what was achieved and what was hoped to be achieved by this exercise? The removal of the Chief Executive of the airline must have been foreshadowed from the beginning, but one suspects that the underlying intention was also always to change the method of operation of the airline. So who is pulling the strings in this puppet show? What is the long term plan?

Adele Ferguson at The Sydney Morning Herald reviews the factors at work, including the failure to invest in fuel-efficient aircraft, concluding:

With some of its bigger institutional shareholders putting pressure on the board to restore dividends after none for two years and lift its share price, which is trading below $1.55, a far cry from the $5 peak it hit before the global financial crisis, Joyce and the Qantas board decided to make industrial relations the weapon to cut costs and maintain margins and yields. In doing so they have driven the share price into the ground, making it a sitting duck for a takeover.




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