Qantas Airlines: Labor Management


Labor, as a factor of production, is a very useful ingredient for the production of goods and services. The Australian labor market is dynamic in the way it responds to both economic conditions and policy changes, coupled with the influences from trade unions, association of employers, state and federal governments, as well as state industrial tribunals (Highfield 2005, p.3). The Australian Airline industry is currently facing several problems such as shortage of skilled labor, unemployment, and inflation, consequently leading to creeping of labor and wage structure (ITF 1992, p.41). The low employment rate has significantly affected the employers who find it hard to recruit from a limited human resource base. However, with the deregulation of the Airline Industry and the labor market, policy changes to allow older workers to continue with work are promising to be effective for the airline companies like Qantas. The Labor unions are likely to still have much impact on the labor structure despite its dilution by the globalization, close association with the management, especially the Qantas Airline management and deregulation.

Introduction

Labor, as a factor of production, is a very useful ingredient for the production of goods and services. Thus labor market is a factor market where labor resources are bought and sold to enhance productivity (Highfield 2005, p.3). In Australia, the labor market has shown a lot of dynamism in the way it responds to both economic conditions and policy changes, coupled with the influences from trade unions, association of employers, state and federal governments, as well as state industrial tribunals (p.3). The Australian Airline industry, just like other industries, is currently facing several issues in relation to labor market and structure, such as shortage of skilled labor, unemployment, and inflation, consequently leading to creeping of labor and wage structure (ITF 1992, p.41).

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Predicted areas of growth and downsizing

However, the Australian labor market has proved to be distinct due to its low unemployment rate, with a 30-year record low of 4% in 2007/2008 (Quiggin 2007, p.45). For employers, especially the Airline companies, these statistics means it is more difficult to find suitable applicants for the vacant positions in their respective companies, largely because the companies do not want to hire the unemployed as stated in the “promise on Social Inclusion need policies to back them up” article (Lansbury & Wailes 2004, p.121). This has resulted in many companies and businesses advertising higher wages to attract other skilled workers to apply, a phenomenon Allan (2004, p.4) describes as “stealing workers”, subsequently making many potential employers shun newly unemployed groups to favor the already employed. Qantas Airline, one of the major Australian Airline companies has had very interesting labor relations with the workers and their union. In essence, the changes in industrial relations were attributed to the privatization of the company, market liberalization coupled with the changes in industrial relations ideology. Bamber, Russell & Wailes (2004, p.239) observe that if Qantas had not been privatized it would have undoubtedly experienced increased competitive pressure and that the lack of government interest in financial support would have meant that the cost-cutting measures would have been set by management and pressure directed to employees.

It is normally argued that privatization increases efficiency since it replaces the varied and potentially conflicting government organizations’ goals with a single unifying goal of profit maximization (Fairbrother, Paddon & Teicher 2002, p.311). However, one would wonder how Qantas has successfully achieved this feat despite the regular public display of pessimism by its management team and a change-weary workforce that are more cynical about the positive association between change and company survival (p.314). Furthermore, the Australian labor market is known to be highly unionized and historically “militant” in nature (Pyman 2001, p.340). It is noted that both external and internal factors have come into play in this case. Trade unions have generally struggled with implications for their traditional industrial strategies of the “Workplace Relations Act 1996” (Giles 2000, p.173). The structural change, organizational downsizing, and the prevalence of individualistic ideology have led to reductions in union density, power, and resources across the overall economy (p.174). That assertive management approach within Qantas and the rapid pace at which change has been embraced and effected have literally forced labor unions into a defensive mode, hence presenting the worker’s grievances as a weakened union unable to impact any change process in the airline company (Fairbrother, et al. 2002). Creedy (2004, p.1) observes that while there is clear-cut evidence that trade unions are attempting to restructure and refocus in order to meet the challenges of the new environment, in many respects it is a case of being too little too late.

One would not be mistaken for associating Qantas success with privatization, product market liberalization, legislative change, and ideological shift but one primary difference between the public and the private sector is the extent and pace of change, rather than its nature (Giles 2000, p.179). The specific changes in industrial relations and work practices introduced in Qantas are identifiable in other international airlines, both public and private. However, it can logically conclude that the focused and single-minded nature of the change seen in Qantas would have not been achieved if it was continuously owned by the government due to the political considerations associated with disputes and the “old fashioned” belief that government is a model employer (Creedy, 2004, p.3).

Qantas privatization also set a platform for the implementation of some changes by the management. The airline applied outsourcing strategies especially for its key functions and the employment of flight staff in other countries (Qantas 2003, 43). Logically, it would be less likely that a high-profile government-owned company like Qantas would have significantly developed its business offshore, offering employment and contracts to non-Australians. Even though it appears that privatization is practically linked to other contextual changes, labor-management change is more explicit. There is also the qualitative difference in the type of change that is undertaken in the privatized companies such as the offshore growth of the company, the basis on which the unions in the aviation industry have begun to re-examine the ways in which they organize and operate (Lansbury & Wailes 2004, p.51). It is predicted that there is the likelihood of continued struggle between the Qantas management and unions in the industry (p.69).

Labor Relations and Unions

The Australian Aviation industry is generally full of labor unions, a phenomenon that has developed against the background of a centrally regulated industrial-relations regime and the concentration of employment in a few workplaces like major airports (ITF 1992, p.66). In the Australian aviation industry, the unions are normally organized along the lines of occupations, for example, the pilots are represented by their union, Australian and International Pilots Association (AIPA) (p.42).

Deregulation of the airline industry and labor market

The Australian domestic airlines have had their activities impacted by globalization, thereby leading to labor market deregulation. In globalization, there is little or no regard to the national borders and the reduced barriers to trade or as some people would describe it: it is the “redesign of political structures and labor laws to maximize exports, reduce state social spending and end state economic regulation” (Giles, 2000, p.3).

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In 19980s and 1990s, the industrial relations system in Australia went through significant changes that were primarily influenced by popular neo-liberal philosophy (ITF 1992, p.44). In the late 1980s for example, the principle of structural efficiency was introduced into the existing Accord that was meant to streamline the wage increase in relation to market efficiency, and in 1993, the Industrial Relations Reform Act initiated a process of decentralization by reducing the role of the Australian Industrial Relations Commission (AIRC) in dispute resolution (Fairbrother 2002, p.241). The elections in 1996 set a precedent for the government that pursued full labor market deregulation through the Work Place Relations Act (WRA), which suddenly altered the course of Australian labor law (Pyman, 2001, p.343). WRA presented employees and employers with the opportunity to negotiate and bargain directly without involving the union, giving employees the much fought for the freedom of association (p.344). Subsequently, there was the introduction of new methods of enterprise bargain where individual contracts were introduced based on the Australian Workplace Agreements (AWAs) and certified agreements which further rendered the unions irrelevant (Giles 2000, p.181).

Global competition due to airline industry globalization has put a lot of pressure on the operation cost of Qantas and other airlines. The fact that labor constitutes 30% of an airline’s costs and unlike fuel and the landing charges, it is under the control of direct management, the heavy pressure has more so been seen in the labor costs, leading to an increased workload (Creedy 2004, p.4).

Qantas, in their recent effort to cut operation costs, introduced content management (CM) strategies that saw them retrench 1000 employees, the use of annual leave to reduce staffing, minimized hiring of new staff, and the conversion of full-time jobs to part-time job status (Quiggin 2007, p.51). The company has indicated that the pressure can be traced back to September 11, SARS, and the global economic crunch (Qantas 2003, p.5), the reasoning that backs the hypothesis of Gialloreto, who stated that during the economic depression, the airline companies will use tactically short-term initiatives to reduce pressure on operation costs (Fairbrother et al. 2002, 52).

Again, it is argued that Qantas’s actions just represented what other airlines were doing, albeit with a different approach, as a result of globalization (Creedy 2004, p.4). Highfield (2005, p.6) says that globalization has changed the management attitudes and views towards employees, and that “HRM’s unitarist approach has placed workers in a state where they are more dispensable and interchangeable like never before. However, redundancies, as well as cutbacks, are of much concern in the human resource policies for the Australian firms since they affect negatively (reduce) employees’ organizational commitment and trust in the management (Quiggin 2007, p.52).

In a study conducted to look at the impact of the pilot dispute of 1989 that was prompted by the demand of a 29% pay rise, Qantas employees agreed that the dispute increased the idea of productivity-based pay that has consequently increased the workload (Lansbury & Wailes 2004, p.1112). The employees felt that job security had remained strong and that their satisfaction in the job has remained high since they love what they are doing, even though they have a strong feeling that this may be used against them. The pilots expressed their dissatisfaction with the labor relations experience with Qantas management, insisting that nothing has been gained with the Qantas management unless pilots made a concession, with the description of the relationship between themselves, management, and the AIPA as adversarial and none of the pilots believed that Qantas management will ever make any serious concession before the pilots (Lansbury & Wailes 2004, p.1115). One informant explicitly stated “management will not let me take annual leave when I would like to and that they would rather allocate to me when they feel it’s convenient to them despite working exceptionally hard for Qantas to gain share after the collapse of Ansett (p.1116). The company’s frequent blame of the cost pressure has been dismissed by many pilots who see malice in that since the company’s continual high profitability, such as the record profit of $650 million in 2005 (p.1117). Qantas has also applied the pilot roster strategy to implement their cost reduction efforts, something they (management) have seen to be a very flexible approach to the agreement, but quite a number of pilots have linked the fatigue at work to the shorter layovers (Highfield 2005, p.7).

Qantas Vs Australian and International Pilots Association

Australian and International Pilots Association (AIPA) is an association of pilots that is tasked with championing the welfare of the pilots (both domestic and international) in Australia. However, there is a general feeling among the pilots that AIPA does not play any legitimate role in the labor relation process since the union has always focused on international pilot members’ welfare at the expense of the domestic pilots, who only got incorporated in the union when Qantas merged with Australian Airlines (Bamber et al. 2004, p.49). The other problem associated with the ineffectiveness of the union is its close ties with the management of Qantas that undermines the autonomy of the union (p.69).

Acknowledging that their overall position and roles have deteriorated considerably, the pilots believe that more adequate union representation will be of much importance. They are pointing out long hours, poor rostering, and their inability to make independent decisions when to take holidays as some of the factors that contribute to their fatigue and subsequently jeopardize safety (Fairbrother et al.2002, p.115).

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Recommendations

The increasing concern about the implications of the aging population has presented policymakers with the greatest challenge in the modern labor market, especially the impact it has on the economy. In the Australian airline industry, the aging of the highly skilled workers has affected the orientation of the labor processes, leading to the recent policy reforms of encouraging aged workers to remain in or return to labor force participation (Quiggin 2007, p.44). This has been predicted to reduce the fiscal burden of pension and other social security payments, improves health outcomes, reduces health costs, and promote well-being (p.51). the industry should focus its efforts to fill the labor gap by retaining the older workers who still have the ability to continue with their work.

Conclusion

The impact of globalization has become very crucial in the overall labor organization in Australia. The Qantas Airline has represented how major firms in Australia have tried to manage labor relations after the deregulation of the general airline industry and the labor market. The management of the Qantas has approached the challenge with the unitarist approach to the employment relations (Highfield 2005, p.4).

The preference for the already employed workers against the unemployed has generated a scenario where the unemployment rate is likely to increase significantly, especially for the young graduates. This may be perpetuated by the recent policy reforms that favor the recall or retaining of the aged employees with relevant skills. Furthermore, the deregulation of the airline industry has increased the employability of international employees, making the labor market in Australia more of an international affair than a local one.

The pilots and their unions have also been affected significantly, with the powers that were once held by the union being transferred to the management, prompting a somewhat forced collaboration between the union and the management (Giles, 2000, p.192). This has led to the deterioration of the working conditions of the pilots and weakened the pilot union (p.193). Despite all the labor market deregulation, Qantas still faces one of the greatest challenges in the Australian labor market. The fact that it was a government-affiliated institution before privatization still holds a lot of sway in the labor market. Trade unions remain a very important factor in Australian industrial relations and a very high number of union-certified employment contracts still remain.

References

Allan J. 2004. “Address to National Aviation Press Club”, Media Release. Web.

Bamber, J, Russell, D, & Wailes, N 2004, International and comparative Employment Relations: Globalization and the Developed Market Economies, 4th ed. Thousand Oaks, CA: Sage.

Creedy, S 2004, “Qantas in Radical Plan for Jetstar.” The Australian, pp.1-4.

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Fairbrother, P, Paddon, M, & Teicher, J 2002, Privatization, Globalization and Labour, Melbourne: The Federation Press.

Giles, A 2000, “Globalisation and Industrial Relations Theory”, The Journal of Industrial Relations, Vol. 42, No. 2, pp. 173-194.

Highfield, B 2005, Reataining the Competitive Edge”, Australain Human Resource Institute. Web.

ITF, 1992, The Globalisation of the Civil Aviation Industry and its Impact on Aviation Workers, International Transport Workers’ Federation, London.

Lansbury, R & Wailes, N 2004, “Employment Relations in Australia”, International and Comparative Employment Relations: Globalisation and the Developed Market Economies, Allen & Unwin, Sydney.

Pyman, A 2001, “Workplace Relations and Other Legislation Amendment Act 1996 (Cwlth): Experiences of Five Australian Trade Unions”, The Journal of Industrial Relations, Vol. 43, No. 3, pp. 340-347.

Qantas 2003, Qantas to reduce staff, Press Release, Qantas Airways, Sydney.

Quiggin, J 2007, “Evaluating Airline Deregulation in Australia”, The Australian Economic Review, Vol. 30, No. 1, pp. 45-56.

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