You’re a historic Australian company, but you’re doing it tough. You claim you’re struggling to cope in a highly competitive international market, with subsidised foreign competition, high energy prices and a high Aussie dollar killing you. So you’ve focused on slashing labour costs and gunning for the unions that represent your workers.

But in reality, it’s your management mistakes, and their failure to respond innovatively to challenges like your competitors have, that have been critical to the problems you now face. So you try to force government intervention to help you out of the corner you’ve painted yourself into.

Qantas? No, BlueScope Steel. The ex-BHP steelmaker and owner of the Port Kembla steelworks may not be as iconic as the Flying Kangaroo, but it has traced a similar path of management failure and  antagonism towards its workers in an industry that has faced increasing international competition and been punished by high prices for raw materials and the strong Aussie.

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As Ben Sandilands showed in one of several incisive posts over the weekend, the list of failures of Qantas management in recent years has been lengthy. Many of the competitive pressures it is facing have, in effect, been self-inflicted. And like BlueScope under Kirby Adams, it has substituted aggression towards unions for competence and innovation. Alan Joyce’s ploy to force government intervention may not have been as blatant as BlueScope’s constant whingeing about a carbon price and demands for compensation, but it’s had the same successful result.

The key difference is, BlueScope can lay off thousands of workers, cripple a regional economy and send ripple effects of economic damage through Australian industry, but it can’t inflict massive economic damage, threaten entire industries and inconvenience hundreds of thousands of people here and overseas. That’s the power that Joyce wields and he has used it as a blunt instrument to short-circuit perfectly legal industrial action.

Consider what Fair Work Australia — headed by a holdover from the Howard government, Geoffrey Giudice — found last night. Not merely did it find that the unions’ industrial action wouldn’t have caused significant damage to the tourism and air transport industries while Qantas’s grounding would do exactly that, it concluded “what we have heard indicates there are still prospects for a satisfactory negotiated outcome in all three cases. The prospect of a negotiated resolution in relation to the three proposed enterprise agreements still remains”.

In short, Joyce’s argument that the unions’ campaign forced Qantas’s hand has been found to be false by Fair Work Australia. There was the prospect of a negotiated outcome, and the unions’ campaigns were not threatening significant damage either to wider industry or (and this appears to have been missed) to Qantas.

Instead, Joyce has used the threat of economic damage and the political pressure of Australia-wide transport chaos to force the government to intervene to end the dispute and force a resolution.

I called it industrial terrorism on the weekend, a description some readers had a problem with. It’s no moral judgment, simply an accurate description of what Joyce is doing — threatening havoc and spreading fear as a means of achieving political and economic ends. It’s industrial terrorism by definition. And it’s worked.

Some suggest Joyce has failed to anticipate how much the grounding will harm Qantas’s brand. The stories from airports here and overseas, of angry, tearful or disconsolate Qantas passengers desperately searching for alternative flights, are undoubtedly very damaging, particularly for Qantas’s international services. But from Joyce’s point of view, there’s no particular problem with brand damage, because his longer-term strategy is offshoring anyway. Why worry about damaging the airline’s brand if your goal is to run that airline down anyway and replace it with offshore-based airlines?

Criticise Joyce if you like, but there’s a rigorous corporate logic behind his threat to sabotage Australia’s transport system.

Of course, if unions had held the economy to ransom in such a manner, the froth-mouthed fury from the Right would have been overwhelming. Instead, the Right is divided — not over the legitimacy of Joyce’s actions, for which there is strong support (and as well from the business sector, which always cheers anyone taking on unions), but on the appropriate response of the government. First Peter Reith, and today Ian Hanke in the AFR, argued against government intervention. Hanke, a Liberal veteran and IR specialist, went further and gave his party a real serve, blaming its lack of IR direction since 2007.

For Labor, all it can do is get the planes back in the air. Qantas has it over a barrel, knowing no government can afford an extended disruption to aviation services, no matter how outrageous the behaviour of the airline. The government moved quickly to use its own Fair Work Act to shut the dispute down, which was exactly what Qantas wanted. That’s the first step. The longer-term challenge for the government is to resolve the basic tension between what voters want — which is the Qantas of old, a high-quality service staffed and run by Australians — and what the market says they can get.

The brand damage that Qantas will suffer is partly a product of this tension, the result of an expectation that Qantas isn’t just another private airline, but a “national carrier” operating in the national interest. Qantas still likes to exploit this residual sentiment in its advertising, but it’s been a very long time since it did anything in the national interest, which is exactly how its shareholders like it. The resolution may be to explain to voters that in a small, internationally exposed market such as ours, the only path back to the old Qantas lies in economically damaging protectionism or costly government ownership — particularly when management is as inept as Qantas’s has been.

But there’s more to the reaction against Qantas than just nostalgia for the good old days of a government-owned Flying Kangaroo. Joyce’s behaviour — Friday’s absurd 71% pay rise, the blatant disregard for the welfare of Qantas passengers, his ongoing malice toward his workforce — confirms a growing community sentiment about business leaders, which is finding its most pointed expression in the #occupy protests but that is manifested in deep-seated voter unease about high corporate remuneration.

The grounding was one of those moments when the mask of capitalism — or at least the version of capitalism we’ve currently settled for — slips to reveal a profound disdain on the part of large corporations towards the communities they profit from. At a time when there’s growing anger about the divide in wealth and power between the so-called “1%” and the rest of us, it’s a risky decision.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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