Qantas CEO Alan Joyce ready for Jetstar dogfight

Qantas CEO Alan Joyce. Picture: AAP

Nine days out from Christmas, the 100 top executives across the Qantas group received a note from chief executive Alan Joyce. It began: “As you know, Jetstar is dealing with two lots of industrial action in the lead-up to Christmas and probably beyond.”

On Friday, the TWU called on baggage handlers and ground staff to stop work at airports in Sydney, Melbourne, Brisbane, Cairns and Adelaide. Over the weekend, Jetstar cancelled almost 100 flights after the Australian Federation of Air Pilots announced that the union’s Jetstar pilots would have rolling stoppages.

For now, Alan Joyce is leaving his Jetstar chief Gareth Evans as the public face of the action, fronting both unions and travellers caught in the no man’s land of landside. Joyce’s staff note, however, makes it very clear who is setting the flight path. No one should underestimate the resolve of the man who, just over eight years ago, was prepared to lock out disgruntled workers, ground the entire fleet of Qantas aircraft and impact 100,000-odd passengers in an unprecedented workplace dispute.

This time around, the language from Alan Joyce is just as firm on union demands for what he says amounts to wage and benefit improvements of up to 15 per cent. “Agreeing to higher wage claims puts the business in an unsustainable, uncompetitive position. We won’t do it.”

On Monday, the pilot union’s executive director Simon Lutton hit back. “The AFAP and Jetstar pilots are frustrated by Jetstar continually inventing figures to suit themselves. The AFAP wage claim is for 3 per cent annual increases to salary in line with Qantas Group policy. Put simply, Jetstar have manufactured the alleged 15 per cent increase based on inaccurate and flawed costings of our non-salary claims, such as those claims relating to rostering and fatigue mitigation,” said Mr Lutton.

A woman walks past an empty Jetstar self check-in console at Sydney Domestic Airport. Picture: Getty Images

Neither Gareth Evans nor Alan Joyce is blinking. It is worth remembering that Jetstar was Joyce’s baby. Appointed in 2003 to run the low-cost airline, his performance over the next five years opened the door to the Qantas head office. But based on his form across 2011 and 2012, we know he is anything but sentimental. Joyce’s drive for efficiency can be traced right back to his passion for mathematics and physics as a university student. Years later, a firm line on costs, including wages, underpinned the Qantas turnaround from flightless bird to eagle.

It is also not lost on the Qantas team that in June this year, management at Jetstar’s competitor Tigerair caved in to a three-year deal with the pilot’s union, backpaid from December 2017, which delivered an immediate 16 per cent pay rise and three more annual increases of 2.5 per cent from December. Earlier this month, Virgin Australia was forced to refute speculation in a report from a fund manager that “Tiger is losing money on many routes and it will be forced to significantly cut capacity or shut down altogether”.

Joyce is sticking to his established bargaining position of 3 per cent annual wage increases and warns his executives to expect the dispute to drag on. Another sign that he will be playing hardball is the decision to cut 10 per cent of Jetstar’s domestic schedule in January (the airline’s busiest month), which together with the December disruption is expected to cost $20m to $25m. “Cutting now means we can minimise disruption when strike action is called later and it improves our ability to recover when that action is taken.”

787-8 review

One more announcement is intended as a shot across the bow for the unions and concerns the fate of three Jetstar 787-8s. Alan Joyce describes them as “currently serving marginal and loss-making international routes”.This might impact routes which are more dollar-sensitive, such as around Honolulu, or where the airline sees too much capacity. It is understood that if the three aircraft were sold, 50 fewer pilots would be required, and a further 50 could be demoted back through the ranks. “A business case has been developed to sell these three aircraft,” Joyce advises executives, “with capital to be reinvested in other parts of the Qantas Group or returned to shareholders.”

There are no doubt many competing options for capital reallocation, from Qantas Domestic under Andrew David to Qantas Loyalty under Olivia Wirth (who stood shoulder to shoulder with Joyce through the 2011 dispute). And then there is Joyce’s long-haul ambition, Project Sunrise.

Interestingly, pilot wages and conditions are also the major outstanding issue on Project Sunrise moving forward. And here, engagement is with a third union, the Australian and International Pilots Association (which has chosen not to push its members on the Jetstar action). On Friday, Qantas announced it had selected the A350 as its preferred aircraft. “Airbus has given us an extra month to lock in an aircraft order without impacting our planned start date,” Joyce explained, “which means we can spend more time on hopefully reaching a deal with our pilots. We’ve done a lot of work on the economics and we know the last gap we have to close is some efficiency gains associated with our pilots. We’re offering promotions and an increase in pay but we’re asking for some flexibility in return, which will help lower our operating costs.”

A final decision on Project Sunrise is expected to be made in the first quarter of calendar 2020. It will be a quarter where sleeves are rolled up for those 100 group executives, with three enterprise bargaining agreements in play: Qantas long haul, short haul and Jetstar short haul. And all in the year that Qantas turns 100.

Ticky Fullerton is Sky News Business Editor and co-anchor of Business Weekend, on Sky News Australia