Qantas Airways and its pilots are heading for court over an outsourcing dispute that could have potential implications for other airlines.
The Qantas pilots' union has filed a complaint with Australia's workplace relations court claiming that the oneworld carrier is using an offshore unit to circumvent Australian labour laws. It claims that Qantas is paying pilots employed by a New Zealand subsidiary some 40% less than Australian pilots who, until recently, flew the same routes.
When Qantas launched New Zealand domestic flights back in 2002, it formed a wholly-owned subsidiary in New Zealand called Jetconnect to operate those flights. Jetconnect hired New Zealand flight crews and negotiated labour contracts at pay rates comparable to other New Zealand flight crews, but significantly less than those in Australia.
The Australian pilots did not challenge Jetconnect because it operated only within New Zealand. Qantas, a year ago, turned over all domestic New Zealand routes to its low-cost unit Jetstar, leaving nothing for Jetconnect to do. Rather than disband Jetconnect, Qantas instead decided to re-deploy it on Qantas flights operating in both directions across the Tasman Sea, between New Zealand and Australia. Within the past six months, the union claims, Qantas has turned over most of these trans-Tasman flights to Jetconnect. Flight numbers, schedules, livery, crew uniforms, and other branding still show Qantas, but the flights are operated by Jetconnect.
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The union claims that Qantas manages Jetconnect, dry-leases jets to it, wet- leases the same aircraft back from Jetconnect, and even trains Jetconnect's pilots. "This unusual test case will determine where the Australian Fair Work Act ends," says Jackson, "and hopefully set limits on the deliberate offshoring of Australian jobs."
David Epstein, Qantas head of government and corporate affairs, responds: "It's really quite simple. We have New Zealand staff operating New Zealand-originated aircraft, operated by a New Zealand company on aircraft that are registered in New Zealand.
"The employees have negotiated a New Zealand industrial agreement," Epstein continues. Jetconnect "is, to all intents and purposes, a New Zealand operation". In his view, "the jurisdiction that covers them is New Zealand".
This is central to the case. The union is not asking that Australian pilots operate the flights, but for Jetconnect pilots to receive the same pay and benefits as their Australian counterparts.
Rick Mirkin, executive director of the New Zealand Airline Pilots Association, which is assisting the Australian pilots in this case, sees this as a test for how far the Australian courts will go to protect the conditions of workers in other countries who are effectively employed by an Australian company.
Among long-haul carriers, the use of foreign-based crews is widespread. In the heat of labour negotiations such airlines may propose to create or expand offshore crew bases unless unions back down on their demands.
Resolving such conflicts sometimes requires a carrier to accept caps on foreign hiring. For example Qantas agreed a year ago not to hire more than 25% of its flight attendants offshore. These disputes are far more likely to be settled in labour negotiations than lawsuits.
How far airlines can go in shifting work to lower-cost subsidiaries may be limited by the practice known as double breasting in the US. If company A forms a new entity - call it company B - to evade company A's labour commitments, company B's employees still may be entitled to company A's pay and benefits. In the US, this occurs if the two entities have common ownership, substantially the same management, inter-related operations, and centralised control of labour relations. In such a case company B is considered the "alter ego" of company A, and must honour their labour contracts. Double breasting may also apply to domestic affiliates and subsidiaries as well.
Even codesharing without shared ownership can spark similar disputes, as illustrated by the claim from United's pilots that United and Aer Lingus are forming an "alter ego airline" to outsource their jobs to a foreign company. As alliance co-operation grows, so will such complaints.
Labour laws differ from one country to the next, but the Australian case could still produce shock waves. If an Australian court can tell an Australian airline what it must pay staff of its offshore subsidiary, such a decision could energise unions elsewhere to question their own airlines' practices.
This could ultimately prompt carriers to look to outsource more work to providers that the airline does not own or control. The specific issue raised in Australia is how far Australia's labour laws reach. However it has broader implications, posing the policy question of how much airlines should still be obliged to follow local laws when they operate and compete in global markets.
Click here for more on Qantas and the move to change foreign ownership limits
Source: Airline Business
