Sunday, 30 October 2011

Grounded by Qantas

PM Lee highlights two lessons for Singapore
By Tessa Wong, The Straits Times, 31 Oct 2011

PERTH: Drawing lessons for Singapore from the current face-off between the management of Qantas Airlines and its staff, Prime Minister Lee Hsien Loong said this highlights the importance of business competitiveness as well as a close relationship among companies, unions and the Government.

He was speaking to Singapore media at the close of the Commonwealth Heads of Government Meeting (Chogm) here yesterday.

Asked if there were any takeaways from Qantas' situation for Singapore, he said: 'It shows how important it is for all companies to be competitive and for employers, unions and government to work closely together to manage the problem.'

Qantas, he noted, faces a competitiveness problem - it is losing A$200 million (S$266 million) a year and its operating costs are 20 per cent higher than those of other airlines.

When the management could not resolve the issue with unions, they took the 'drastic step' of grounding flights.

On its part, the Australian government has been unable to resolve the situation, and can only order workers back to work while giving them more time to talk.

'It is a very painful adjustment and they have not been able to reach an agreement,' Mr Lee observed.

In recent weeks, Qantas employees have gone on strike over wage and job cuts, work conditions and outsourcing of jobs.

On Saturday, the management retaliated by taking the unprecedented step of grounding all its flights worldwide.

An unhappy Australian government called for an emergency arbitration hearing by an independent tribunal to resolve the matter. Early this morning, the tribunal ordered an end to the dispute.

'We have to make sure we stay competitive because if we allow ourselves to become non-competitive, we will be in as unhappy a position,' said PM Lee.

Asked about Singapore employers' complaints about the Government's recent curbs on foreign worker supply, he said he was aware of their pain and the business opportunities lost.

He acknowledged that it would be particularly painful for the many small and medium enterprises and local companies which had previously depended on foreign workers.

But there is no easy choice, he said.

'Because it's not as if you send away all the foreign workers or keep out all the foreign workers, then we live in paradise. There is a price, and it's a quite a high price to pay. As we try to manage the population in Singapore, we are going to also accept a lower growth rate,' he said.

Emphasising the trade-offs, he said that having fewer foreign workers in Singapore will lead to slower growth - if Singapore achieves 3 per cent or 4 per cent growth in a year, 'we should consider it not a bad year'.

'We've been used to 5, 6, 7 per cent, or even more, in the past, but it's (now) a different phase. When you're an adolescent, you grow and shoot up inches every year; but when you're mature, you hope to grow, not necessarily taller, but wiser and better. We have to make that change of gear,' he said.

Last week the Monetary Authority of Singapore (MAS) predicted that Singapore could grow below its potential rate of between 3 per cent and 5 per cent next year.

It also said economic growth over the next few quarters would stall, before picking up late next year.

PM Lee, however, cautioned that this did not mean things would be smooth sailing after next year.

'MAS is being optimistic: They say hopefully by the end of next year, things will pick up. But even if things pick up by the end of next year, the longer-term problems in Europe are not going to disappear.

'I expect a period of several years of difficulty in the global economy and we have to be prepared for that,' he said.

European leaders last week agreed to boost the euro zone bailout fund and banks would have to raise more capital. Banks holding Greek debt would also accept a 50 per cent loss.

But this solution is only temporary and addresses only part of the problem. It has not been implemented and leaders are not sure how big the problem is, said PM Lee.

Even if these problems are addressed, the long-term structural issue is a fundamental difference between the Mediterranean economies and those of Germany and France, in terms of productiveness, fiscal balance and the amount of inflation they can tolerate.

'The way forward is to go for a closer political relationship, a more cohesive Europe.

'And that depends on countries feeling for one another, but for the Germans to feel for the Greeks, never mind like the Greeks, and vice versa, I think that's a work of many, many years,' he said.

Australia's Qantas grounds all aircraft in drastic step
Reuters, AP, AFP, 30 Oct 2011

Tens of thousands of passengers left stranded as Australia's national airline cancels all flights over a bitter dispute with unions

Sydney - Australia's Qantas airline left tens of thousands of passengers stranded - some of them right on the runway - after it grounded its entire fleet because of a bitter dispute with airline unions yesterday.

Nearly 20 world leaders meeting in Perth could also be left in the lurch as the national carrier screeched to an abrupt halt at about 2pm local time yesterday (11am Singapore time), when chief executive Alan Joyce announced the shock decision.

The Australian government quickly called for an emergency arbitration hearing, but it was adjourned late last night after hearing evidence from the unions and the airline.

It will resume today, when the government will argue that the airline be ordered to fly in Australia's economic interests.

British couple Brenda and Alex Bovingdon were on a plane that was taxiing up the runway at Sydney Airport when Mr Joyce's bombshell edict took effect, prompting the pilot to turn around.

'He said, 'There's a problem, don't worry it's not mechanical, I'm very sorry to tell you this, in my career as a pilot I have never encountered this before,' ' Mrs Bovingdon said.

Travellers in Australia and at regional hubs such as Singapore and Hong Kong were left fuming as their travel plans were derailed, forcing them to scramble to book other flights.

At Singapore's Changi Airport, travellers turned up at Terminal 1 for their evening flights by the hundreds, only to be packed off in buses to hotels and told they could be stranded until tomorrow.

One of them, Mr Peter Hunter, 51, said: 'I'm upset, but what can you do? When they strike, everyone has to pay.' The retiree, who was bound for Melbourne, said it was the first and last time he would fly with Qantas.

Transiting passengers found that they could not complete their journeys.

Qantas' decision could not have come at a worse time. The western Australian city of Perth is hosting the Commonwealth Heads of Government Meeting, and 17 heads of government could be marooned.

Australian Prime Minister Julia Gillard said her government would help the Commonwealth leaders fly home.

'They took it in good spirits when I briefed them about it,' she told reporters.

Ms Gillard immediately intervened in the situation, taking the rare step of asking the industrial regulator to terminate the strike action because of the dangers it was now posing to the national economy.

Staff will not be paid starting tomorrow, and Mr Joyce estimated the grounding will cost the airline A$20 million (S$26.6 million) a day. It had already been reducing and rescheduling flights for weeks.

'They are trashing our strategy and our brand,' Mr Joyce told a news conference in Sydney, referring to the striking unions.

Union leaders are worried that a recent restructuring announcement would be a means to move some of Qantas' 35,000 jobs overseas.

The company told customers to check updates on Qantas' Facebook page, which was inundated with hundreds of comments, many of them berating Mr Joyce and criticising the company's decision to stop flights.

The Australian carrier has built a global network over the past 90 years, as it transformed from a desert Outback mail service into the world's 10th-largest airline and one of the most profitable.

Adding to travellers' problems, Air France has cancelled about one in five flights and warned of wider disruption as a five-day strike by flight attendants over employment terms began yesterday.

The strike is affecting mostly short- and medium-haul flights out of French airports, but 10 long-haul flights were also cancelled.

Micro or macro, focus makes all the difference

Qantas, union dispute highlights Australian contrast with Singapore's industrial relations model
By Chew Soon Beng, TODAY, 14 Nov 2011

Qantas has been a profitable airline for many years. However, its international markets are not making money. Qantas claims that its pilots are among the best paid in the world in terms of salary and fringe benefits. The unions at Qantas demand job security, higher salary and fringe benefits. In a nutshell, the unions want to keep the good jobs in Australia. They do not want non-Qantas pilots to fly Qantas routes, a claim that Qantas rejects.

The management of Qantas has presented a new business model to the unions, arguing that the future of Qantas lies in the Asian markets. If Qantas does not change its business model and focus on the Asian markets, it may not be successful in future and can disappear altogether. It cites Ansett's collapse as a reminder.

The new business model includes, according to a BBC report, "a new premium airline in South-east Asia bankrolled by Qantas but not bearing the Qantas name or trademark. The re-branding move would involve 1,000 job cuts in Australia at Qantas' Australian operations as some roles will be off-shored to Asia, which management said was 'necessary' for the restructuring to work. The new business model also implies that Jetstar would be making a bigger (and cheaper) push into the North Asian markets, especially Japan".

Qantas also stated that the cost of employing pilots for Qantas cannot be the same as that of employing pilots for Jetstar for the obvious reason. In other words, there is no cross-subsidy here.

Unions by nature tend to be micro-focused, meaning they would protect the benefits of their members. In this regard, one can say that most unions have short-term goals. In any case, it is expected that the industrial disputes will arise.

Hence, it is not surprising that Qantas was reported as claiming that the ongoing industrial dispute was costing the company £12 million (S$25 million) per week in flight cancellations and delays - although unions disagreed with the suggested level of disruption caused by some staff tasking strike action and working to rule.

It can be argued that Qantas has not been happy with the Australian government for its inaction. In the company's view, the new business model is good for Australia and yet the Labor government has been reluctant to confront the unions. In other words, the government should be macro-focused and be supportive of Qantas in making Australia a more competitive economy.

In the eyes of Qantas, the Labor government is being "micro-focused" for being short-term for its own survival. Hence, Qantas decided to teach the Labor government a lesson and ordered a total shutdown, damaging the Australian economy. The move also upset many Australians, and some doubt that Mr Alan Joyce can survive as the CEO. But the shutdown was effective in forcing the government to act: Qantas management was told by Fair Work Australia to get its aircraft back in the sky and drop its plans to lock out its workforce.


Prime Minister Lee Hsien Loong has remarked that Singapore has a different industrial relations model for settling industrial disputes. The Republic's labour movement is represented by the National Trades Union Congress (NTUC). The NTUC is macro-focused because its leaders are also senior members of the ruling People's Action Party (PAP). 

By being macro-focused, the NTUC takes a long-term perspective in raising the welfare of its members as well as the entire labour force, by working alongside the Government and the management to raise Singapore's competitiveness.

The NTUC has about 650,000 members, which is remarkable as Singapore's active labour force is about 1.7 million strong. It is thus not surprising that industrial disputes normally get resolved at the branch level. If disputes persist, the Ministry of Manpower can mediate, and as a last resort the disputes can be referred, if necessary, to the Industrial Arbitration Court where the settlement is final.

The NTUC has more than 60 affiliated unions, and the union leaders at the affiliated level can be micro-focused as they have to be elected by the union members. But industrial peace has prevailed because there has been no change of government in the General Election since 1959, and the NTUC and the PAP work strategically to ensure that nothing like the Qantas episode can take place.

The Singapore Airlines (SIA) pilots' union is an interesting case. In 2004, because of SARS, the national carrier persuaded the Air Line Pilots Association of Singapore (ALPA-S) to accept a pay cut of 16.5 per cent, and the result was that 55 per cent of the pilots voted to sack the union committee that had negotiated the wage cut.

With SIA critically anchoring the Republic's position as an air hub, Government leaders intervened and warned that they would not allow the pilots to "do Singapore in", urging the pilots to support the wage-cutting measures to restore SIA's competitiveness. ALPA-S is not affiliated to the NTUC, which explains why this union is peculiar. It is no surprise that the Singapore Government would not allow a union - in this case, a micro-focused union - to hold the country to ransom.

Chew Soon Beng is professor of Economics and Industrial Relations at the Nanyang Technological University.

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