New era as Qantas bows to unions with ‘pragmatic’ deal

Have the actions of former CEO Alan Joyce left his successor Vanessa Hudson in a position where Qantas has never been weaker with unions?

Qantas CEO Vanessa Hudson has 14 unions to contend with and knows she cannot afford industrial action after several years of Qantas being the nation’s most complained-about company. Picture: AFP

What a difference a decade makes.

In 2011 Alan Joyce grounded the entire Qantas fleet, deliberately inconveniencing 80,000 customers in a ruthless game of chicken amid industrial action by its pilots, baggage handlers and engineers.

It was a winner takes all approach and Joyce looked – at the time – to be first past the post. The three unions, one of which had vowed to “slow cook” the airline, were ordered to stop further drip-fed industrial action.

But it turns out there was another lap.

On Thursday newbie Qantas chief executive Vanessa Hudson announced a deal with the Flight Attendants Association of Australia (FAAA) that insiders say is both “too generous” to staff and will definitely be “more expensive” than the airline’s pitch to ­investors.

Hudson has 14 unions to contend with and knows she cannot afford industrial action after several years of Qantas being the nation’s most complained-about company. Last year the airline was found to have illegally fired 1500 baggage handlers, top executives were hauled before a senate inquiry, and Joyce stepped down earlier than expected.

Qantas CEO Vanessa Hudson, centre, with first officer Lauren MacLean, left, and flight attendant Anna Shevel at the Sydney flight training centre. Picture: NewsWire / John Appleyard

The damage to the Qantas brand has been massive but didn’t stop the airline posting on Thursday its second highest profit on record. The airline has an unassailable dominance in the domestic market – made even more lucrative by the demise of Rex and the recent stumbles of Virgin Australia.

So in light of super profits and an under-repair reputation, Hudson has been forced to pull the pragmatism lever on the problem-child international business.

Of course the airline has pointed out that the Albanese government’s Same Job Same Pay legislation gave it little choice than to come to an arrangement with the FAAA. After all, many believe the legislation was devised with exactly Qantas in mind, given its penchant for setting up different companies to employ cabin crew on lower pay rates than its legacy employees.

Hudson had no choice than to reach a new agreement with its domestic cabin crew.

But rolling its international flight attendants in too was a surprise, and probably not required by the new Same Job Same Pay laws.

The airline said the new agreement with flight attendants (both domestic and international) would cost it $60m and equate to a 26 per cent pay rise.

The annual figure is $90m and counting. Insiders say it could be double this when ultra-long haul Project Sunrise flights kick off in 2026. Qantas International flight attendants that work for its internal labour hire companies – which is three-quarters of them – will receive about a 30 per cent pay rise. In simplified terms, a standard flight attendant flying Perth-London will now receive a $10 per hour pay rise, to $46.

And their conditions will improve exponentially. Flight attendants on the new Project Sunrise ultra long-range flights such as Sydney-London will see their layover time rise by 10 hours from what a Perth-London crew get to 60 hours.

Qantas is a capital-intensive business. Fuel accounts for about 30 per cent of costs and is outside the airline’s control. Labour is another 30 per cent and in international its margins in a normal year might be 5 per cent as it competes with Middle East and Asian carriers with lower crew costs.

So hard is it to compete in international that only a decade ago Joyce was looking at hiving off the unit to stem its losses as it struggled to compete with lower-cost competitors, which often had a better product.

Right now, of course, Qantas is making money hand-over-fist on its international routes.

Since the pandemic, rival airlines have struggled to find enough aircraft to restart Australian flights and the pent-up demand for travel has led many Australians to pay whatever it takes for a trip.

But Hudson knows full well it won’t last.

The top rated airline Qatar will be back, after having a bid to increase flights to Australia rejected by the government on flimsy grounds. Turkish Airlines was given a range of flight rights last year, instead, and will soon have the aircraft to action its air services agreements.

So what was she thinking?

Game planning by the airline suggested if it was taken to court and the new laws found to apply, a worst-case scenario could have left it with increased costs of $400m over the next few years. This, however, seems far fetched.

Perhaps then there is an offshoring play afoot?

The new deal Qantas has struck with the FAAA (international) certainly leaves room for that option. Under the new deal on Project Sunrise flights, a “majority” of staff must be Qantas mainline staff but that leaves 49.9 per cent that could come from cheaper bases.

Qantas already has a London and Auckland based crew who don’t fall under the Same Job Same Pay legislation and are not part of the deal.

New York is the first flagged destination for direct flights from Sydney under Project Sunrise.

Anyone for a rendition of “I still call New York home?”

Originally published as New era as Qantas bows to unions with ‘pragmatic’ deal