Qantas Resumes Flights as Goverment Steps In

Qantas Airways Ltd. (QAN) resumed flights today after Australia’s biggest carrier grounded its fleet two days ago, stranding about 80,000 passengers, in a bid to force an end to labor union strikes.

The airline rose to the highest in almost two months after the nation’s industrial-relations regulator ordered an end to the strikes over pay and job security that Chief Executive Officer Alan Joyce said had cost Qantas A$68 million ($72 million) and caused a plunge in bookings.

The ruling marks a victory for Joyce, 45, whose move to ground the fleet with no notice sparked criticism from Prime Minister Julia Gillard, union leaders, tourism operators and passengers. Joyce is seeking to reverse losses at the Sydney- based carrier’s international operations by setting up new ventures overseas, while also cutting jobs in Australia.

“It’s been a public-relations disaster but the status quo for Qantas was not sustainable,” said Matt Williams, who helps manage A$17 billion of assets at Sydney-based Perpetual Ltd. “In the fullness of time, people will be back and they’ll recover from the public relations side of things.”

Flights resumed when an Airbus SAS 330-300 aircraft carrying 88 passengers to Jakarta took off shortly after 3:40 p.m. from Sydney airport. It will take 24 hours for the fleet to return to normal services, Joyce said at a media conference in Sydney.

Engineers, Baggage Handlers

Qantas grounded 108 planes that fly from 22 airports worldwide on Oct. 29 to confront engineers and baggage handlers seeking higher pay and job-security measures. Long-haul pilots have also staged protests in a bid to get the same employment conditions whether they fly for Qantas’s namesake carrier or planes from its budget arm Jetstar.

As well as halting flights, Joyce had also planned to lock out workers from three labor unions. The move prompted the government to apply for an order from Fair Work Australia to end the strikes and lockout. Qantas carries about 65 percent of domestic travelers, and about one-in-five international fliers.

The regulator handed down its order at about 2 a.m. in Melbourne, following more than 12 hours of hearings spread over two days. The decision gives the two sides 21 days to reach agreement. After that, the regulator may extend talks for another 21 days or begin an arbitration process that will impose a resolution.

‘Heading Toward Arbitration’

Richard Woodward, vice president of the Australian & International Pilots Association, said that the two sides would meet tomorrow to begin talks. Still, he said he expects Qantas to feel emboldened by the labor ruling, which may dent chances for a compromise.

“I think it will end up in enforced arbitration,” Woodward said.

Unless there is a “massive breakthrough” in negotiations, the dispute “seems to be heading toward arbitration by the full bench of Fair Work Australia,” Allan Drake-Brockman, Perth office leader and head of the Australian workplace relations, employment and safety practice group at DLA Piper, said in a phone interview today.

Arbitration could take months and probably won’t be resolved until well into next year, he said.

Qantas’s debt rating may be lowered by Moody’s Investors Service, which ranks the airline Baa2, the second-lowest investment grade, according to a statement today. It has an equivalent BBB score at Standard & Poor’s, which placed the company on negative outlook.

Extra Flights

The carrier plans to put on extra staff and flights to help clear a backlog of stranded travelers after canceling at least 450 services since Oct. 29. Jetstar, regional carrier QantasLink and a unit that flies to New Zealand weren’t affected by the shutdown.

“The only option that we had in response to the union action was to take our own action,” Joyce said today at a televised news conference in Sydney. “The clouds have gone. Qantas will get back to where it was before this activity.”

The airline rose 4.4 percent to A$1.6125 in Sydney today, after gaining as much as 7.4 percent, compared with a 1.3 percent decline for the country’s benchmark S&P/ASX 200 index. The carrier has declined 37 percent this year.

Virgin Shares

The parent of Virgin Australia, the nation’s No. 2 carrier, surged as much as 8.3 percent today, the most in two months, on speculation the Qantas grounding may threaten the Flying Kangaroo’s grip on the corporate-travel market. The carrier, a unit of Virgin Blue Holdings Ltd. (VBA), has rebranded itself and abandoned a low-cost strategy to challenge Qantas for business- class traffic.

“This grounding could not have come at a better time” for Virgin, said Robert Bruce, an aviation analyst at CLSA Ltd. in Hong Kong. “In the medium term, corporate procurement departments are more likely to allocate a greater portion to Virgin.” The Brisbane-based carrier was also adding extra flights today.

The Qantas dispute may also help Singapore Airlines Ltd. win long-haul traffic and aid the carrier’s budget arm Tiger Airways Holdings Ltd. (TGR) in winning back passengers, CLSA’s Bruce said. Tiger’s Australia unit was ordered to halt flights earlier this year because of safety concerns.

“Qantas took an extreme approach,” Gillard said today in a television interview on Channel 7. “It’s a question of the grand inconvenience for passengers and the impact for the national economy that’s concerning me,” she said.

Keeping the planes out of the skies would have cost A$20 million a day, the airline estimated. The carrier has already lost A$68 million because of labor disputes this year, Joyce said on Oct. 28.

To contact the reporter on this story: Robert Fenner in Melbourne at rfenner@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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Photographer: Sergio Dionisio/Bloomberg

Qantas Airways Ltd. aircraft stand on the tarmac at Sydney International Airport in Sydney, Australia, on Monday, Oct. 31, 2011.

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Photographer: Sergio Dionisio/Bloomberg

Qantas Airways Ltd. aircraft stand on the tarmac at Sydney International Airport in Sydney, Australia, on Monday, Oct. 31, 2011. Close

Qantas Airways Ltd. aircraft stand on the tarmac at Sydney International Airport in Sydney, Australia, on Monday, Oct. 31, 2011.

Photographer: Sergio Dionisio/Bloomberg

A Qantas Airways Ltd. Airbus A380 aircraft taxis on the tarmac at Sydney International Airport. Close

A Qantas Airways Ltd. Airbus A380 aircraft taxis on the tarmac at Sydney International Airport.

Photographer: Sergio Dionisio/Bloomberg

Travelers check in to their flights at Sydney Domestic Airport. Close

Travelers check in to their flights at Sydney Domestic Airport.

Photographer: Sergio Dionisio/Bloomberg

Alan Joyce, chief executive officer of Qantas Airways Ltd. Close

Alan Joyce, chief executive officer of Qantas Airways Ltd.

Photographer: Sergio Dionisio/Bloomberg

A stranded Qantas Airways Ltd. traveler sits in the domestic terminal at Sydney Airport. Close

A stranded Qantas Airways Ltd. traveler sits in the domestic terminal at Sydney Airport.

Photographer: Sergio Dionisio/Bloomberg

Alan Joyce, chief executive officer of Qantas Airways Ltd., at a news conference in Sydney on Oct. 31. Close

Alan Joyce, chief executive officer of Qantas Airways Ltd., at a news conference in Sydney on Oct. 31.

Photographer: Sergio Dionisio/Bloomberg

A man takes a photograph of departure information screens in the domestic terminal at Sydney Airport. Close

A man takes a photograph of departure information screens in the domestic terminal at Sydney Airport.

Photographer: Sergio Dionisio/Bloomberg

Qantas jets are grounded at the domestic terminal at Sydney Airport on Sunday. Close

Qantas jets are grounded at the domestic terminal at Sydney Airport on Sunday.

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