Many bloggers, such as Ben Sandilands in his post (http://www.crikey.com.au/2011/11/01/post-grounding-now-its-the-qantas-virgin-bidding-war/), have been commenting on the decision taken by Qantas Airways’ management to ground its fleet in response to industrial action.

The industrial action began with Qantas’ desire to cut costs to remain competitive. It needed to compete with low-cost airlines such as Virgin Australia, which has also just rebranded, changing its name from “Virgin Blue”. Virgin Australia recently moved in on Qantas’ very lucrative monopoly on business-class travel. Qantas is also suffering on international routes because the high Australian dollar has made Australian employees much more expensive and, therefore, less competitive. Additionally, the decline of North Atlantic economies has led to a reduction in tourists travelling from Europe and North America to Australia.

Qantas’ response to this situation has been to offshore jobs and to refuse the unions’ requests of a 5% wage increase (only around 0.4% above the Australian average increase). This led to various forms of industrial action, which began to damage Qantas’ brand. I recently experienced this first-hand as a passenger on a Qantas flight when a pilot expressed his opinions over the PA to all passengers. Qantas’ offshoring of jobs has caused significant damage to the airline’s reputation. Despite being known as “The Spirit of Australia”, Qantas is now regarded as cheap and somewhat foreign.

The situation for Qantas’ brand went from bad to worse when management decided to ground the entire fleet for two days. It was a shrewd move to force a stop to industrial action. However, the damage to the brand through interrupting the travel of 140,000 passengers seems immeasurably more significant than the benefit of stopping work. Politicians, media and the general public across Australia have attacked the actions of management, labelling it “un-Australian”. Qantas is now trying to recover through the use of promotions and discounts as a form of apology to the public for the disruption. However, even if it works, management’s attempts to remedy the damage will be very costly.