Australia's Qantas Airways has grounded two more planes due to an escalating industrial dispute which threatens to disrupt thousands of domestic flights leading up to the crucial Christmas period.
Qantas warned on Tuesday of a maintenance backlog as aircraft engineers threatened to continue work bans until the end of the year, sending its shares down more than 5 percent.
“If this overtime ban continues, we will be grounding even more aircraft,” Qantas chief executive Alan Joyce said.
Two Boeing 767 aircraft would be grounded on Oct. 24 in a move expected to result in the cancellation of a further 80 domestic flights over the next month, Qantas said.
The cancellations are in addition to five aircraft already grounded by Qantas, which operates a total fleet of more than 250 aircraft. Qantas has cancelled about 500 flights, removing 88,000 seats from sale over the next month, due to the dispute.
Qantas has been hit by a string of strikes since September and faces a prolonged dispute involving baggage handlers, ground staff, engineers and pilots over pay and conditions and plans to cut domestic jobs as it looks to expand in Asia.
It is the worst dispute the airline has faced since 2008 when industrial action by engineers cost the airline A$130 million ($133 million), according to local media.
Disruptions have mainly hit domestic flights in Australia where the carrier makes most of its profits, particularly from its low-cost offshoot, Jetstar, and frequent flyer programme.
Qantas' international business is losing A$200 million a year and is key to the dispute because unions oppose the airline's plan to cut local jobs in favour of expanding in Asia.
SHARES TUMBLE
Qantas shares extended falls in a weak overall market to end down 5.2 percent at A$1.46, not far off an all-time low of A$1.35 hit earlier this month.
Investors Mutual portfolio manager Jason Teh said the industrial action was hitting the shares.
“Union issues are always an issue ... It is getting a good deal of air time at the moment,” he said.
Bank of America Merrill Lynch estimated the initial grounding of five planes would cost A$13 million in lost monthly revenue and equal 3 percent of expected October capacity.
Joyce said the Australian Licenced Engineers Association (ALAEA) had been banning overtime work since September, causing a backlog of maintenance. The union has written to Qantas saying the ban would remain in force until Christmas.
The government last week warned Qantas and unions it could intervene to force an end to the dispute although Prime Minister Julia Gillard appeared to soften her stance on Friday, telling the two sides to resolve their issues.
University of Adelaide law professor Andrew Stewart, who helped the government draft current employment laws in the Fair Work Act, said the dispute could drag out for months unless unions or Qantas decide to dramatically raise the stakes.
“This is not your average industrial dispute, essentially about money. This is a set of disputes between parties who are poles apart and have very different visions for how this business should operate,” Stewart said.
“It's about the future of Qantas as a distinctively Australian airline, or (as) an airline that flies in and out of Australia but essentially makes its money from operating in Asia,” he said.
Workplace Relations Minister Chris Evans could intervene and order a stop to industrial action only if it was threatening public health and safety, or causing major damage to part of the economy, Stewart said.
Earlier this month, the industrial fight with unions turned more heated, with threatening letters sent to Qantas chief Joyce and other management. - Reuters