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Oct 31, 2011

The remorseless logic and profound disdain of Alan Joyce

Qantas is prepared to threaten the Australian economy and thus has the government over a barrel. But it's confirming Australians' growing resentment of corporations.

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.

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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140 comments

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140 thoughts on “The remorseless logic and profound disdain of Alan Joyce

  1. Jimmy

    Amateur Hour stuff from Joyce, he blew all community support for his side of the dispute by grounding the fleet, especially as it was just days after the 71% pay rise and got the govt off side by not notifying them before hand and grounding the fleet when CHOGM leaders were trying to get home.

  2. Suzanne Blake

    Bernard,

    While his timing was poor (should have waited until after Cup), Joyce has a point:

    They have 9 engineers per plane, while Virgin and Jetstar have 2.

    The pilots have great conditions, that are from 20 – 30 years ago.

    Gillard should have called Joyce back on Saturday and not ognored his calls. The BBQ in Kings Park for CHOGM is second in this instance.

    Gillard saying today she was worried about court action against clause 431 is a joke, its HER legislation

  3. FOPPSOMMS

    I for one feel safer knowing that there are more qualified engineers inspecting the plane that I am about to spend the next few hours on. If that’s the difference between fiery oblivion or a safe flight, I’m glad for it! Of course, as has been seen over the last two years, nine engineers still isn’t enough for the embattled RB211 engine’s on ageing 747s. Maybe Qantas shouldn’t have off-shored the engine maintenance shop afterall!

  4. Pamela

    As if FLY IN / FLY OUT CEO Joyce cares about Qantas beyond it’s role as his current cash cow.
    When his contract is up and he flies away to decimate another company whilst making big bucks- will he care what happens to Qantas?

    Dick Smith called it EXTREME CAPITALISM- this is what the Occupy Movement is trying to articulate.

  5. jj

    “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.”

    Bernard – I honestly dont think voters want the above – Yes a good reliable frequent domestic service between major cities with access to lounges etc that suits business travellers -but staffed and run by Australians?? – what the heck does that mean? and who really cares.

    And dont start on the worlds safest airline claptrap because virtually everyone will fly almost any airline if the price is right (except Aeroflot perhaps). I have travelled OS regulary for a good period of time and the main reason I dont use QANTAS is because it is too expensive.

    What the market gives us at the moment is choice and by and large for me QANTAS is not a choice I make

  6. SBH

    Absurd indeed but ludicrous was the only way to describe Joyce calling it ‘a pay cut’.

    Like Telstra and the Commonwealth bank before it, there is no longer any reason for Australians to be loyal to QANTAS.

  7. Oscar Jones

    Oh come on everyone knows it was Julia Gillard’s fault and she’s also responsible for the flat tyre my push bike got on Sunday in Centenniel Park.

    Way to go Joyce- the PM is hosting a bunch of world leaders and doesn’t get back to you so make the 70,000 world-wide customers suffer needlessly. No wonder the shareholders (dolts) voted you $5M the previous day. I think they may rue that decision.

    News Corp have gone into overdrive with their attacks on Gillard (like Joyce could not have waited just one day more before creating world-wide havoc)..and the bizarre thing is, this lot at the Australian singing from the same song sheet (except Mumbles who always makes sense) expect us to now pay to read their tosh!.

    Oddly enough, when Ansett went to the wall with many creditors only just getting paid this year, I didn’t hear a squeak from the Tories that it was John Howard’s fault.

  8. gapot

    There are very few areas in the manufacturing sector where Australia has any advantage. The government has in the past tried to pick winners and lavish tax dollars on the chosen few only to see the foreign owned player shut up shop and take their factories to asia. How does the government make these silly subsidies , they look at the margin in that particular seat and work out how much will it cost to buy the votes. Seems strange that QANTAS is not on the list of protected industries seeing as the company gives our boys and girls in Canberra lots of bribes.

  9. Jimmy

    SB – “Gillard should have called Joyce back on Saturday and not ognored his calls” Check your facts on that one SB, Qantas themselves said this morning that no phone calls were made to the PM which makes it a bit hard for her to return them.

    FOPPSOMMS – “I for one feel safer knowing that there are more qualified engineers inspecting the plane that I am about to spend the next few hours on” I second that.

    The real issue here doesn’t appear to be money (one union has agreed on pay already) it is the issue of using Asian labour to replace Australian labour.

  10. John

    @SBH
    Australians haven’t been loyal to Qantas for years.
    They prefer cheap domestic carriers and cheap international carriers.
    That’s why Qantas is in trouble.

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