A comparative analysis of restructuring employment relationships in Qantas and Aer Lingus: different routes, similar destinations

Abstract

This paper examines the experiences of Qantas and Aer Lingus. The two companies have a shared history as national, ‘legacy’ (full-service) carriers and strategically important, ‘benevolent’ employers. More recently, both airlines have been forced to change in the face of competition from low cost carriers (LCCs) and external threats to their existence. In this paper, we examine how the two airlines have reacted to these pressures. We look at the role played by institutional frameworks and competitive circumstances in determining industrial relations strategies. The entry of LCCs and changes (or potential changes) to ownership structures through privatization and takeover bids have led to downward pressure on pay and conditions at both airlines. Accordingly, a key issue considered is whether a collectivist model of employment relations can survive in the face of low cost competition.

Keywords:

• airline industry
• industrial relations
• low cost carriers

Notes

 1. It has been reported that Qantas makes up to 20% of its profits from the LA–Sydney route (Rochfort, Banham and Garnaut 2006).

 2. Awards are collective agreements which contain minimum terms and conditions of employment in a firm or industry. They may be state-level or national-level awards, covering all workers in a certain occupation.

 3. The FAAA operates as two separate associations covering short-haul cabin crew (FAAA Domestic) and long-haul cabin crew (FAAA International).

 4. However, Qantas's CEO has stated publicly that the Qantas Group has also created 7000 jobs since 2000 (Creedy 2006a).

 5. This was also present in US airline restructuring, indicating the limits of pure concession bargaining even in a US setting.

 6. This body was provided for under worker participation legislation and has been in existence since the 1980s.

 7. This, combined with an earlier tranche of shares that came to 2.3%, resulted in a total employee shareholding of 14.9%.

 8. In 2001, Qantas workers received no pay increase, instead gaining a one-off cash bonus. From 2002 onwards, Qantas has consistently negotiated annual increases of 3% (the average annual increase in the Consumer Price Index over recent years).

 9. Indeed, in April 2007 Virgin Blue cabin crew rejected a wage deal put to them by management and the FAAA Domestic that demanded ‘a high degree of flexibility’ and productivity gains. The deal would have allowed the airline to take on extra part-time crew on half pay. Whereas the previous EBA had 4% annual pay rises, the latest offer only contained 3% annual pay rises (Rochfort 2007c).

10. A wet lease involves one airline or company contracting operating services – including aircraft, crew, maintenance and insurance – to another airline.

11. Qantas faced an unsuccessful takeover attempt by a private equity consortium – which included Ryanair's chairman, David Bonderman – in late 2006. While it is not within the scope of this paper to discuss the attempted takeover, it is predicted that a future takeover is likely, leading to massive expansion of Jetstar and the scaling-back of Qantas services (Creedy 2007). The Ryanair bid for Aer Lingus following privatization was similarly unsuccessful. Subsequently the EU Commission blocked the takeover in June 2007. Announcing an intention to appeal the decision, Ryanair CEO Michael O'Leary questioned the viability of Aer Lingus because it was a ‘small peripheral airline’ and predicted ‘it will get into trouble again because of its cost base’ (Kenna 2007).