Qantas planes will be back flying tonight after Fair Work Australia, ruled at just after 2 am today that the dispute between the airline and the unions should be terminated.
The decision, which came after a lengthy Fair Work Australia hearing, gives the Qantas and the three unions 21 days to resolve their dispute and reach an agreement that would be binding.
If they fail to do that, there will be compulsory arbitration.
According to media reports, the early morning decision came as the federal government was considering taking matters into its own hand by using special powers under the Fair Work Act to terminate the dispute itself.
Despite this decision the brawl will rumble on now for weeks.
But of greater importance will be the Reserve Bank’s decision on interest rates tomorrow and the feeling is that it will cut by 0.25% to 4.50% (See the Diary).
Local investors and the sharemarket (plus the ASX) the central bank and the other key regulators ASIC and APRA will be watching the struggle by US financial services group, MF Global to remain afloat.
It is a big share, futures and Contracts For Difference broker with a substantial Australian business and local regulators will want to know if their local clients and counterparties are safe in the event of a rumoured sale.
MF Global seems to have lost money by buying low-rated European sovereign debt and then using that to finance itself.
The company saw its market value sliced by two third last week as fears grew about its health.
Downgrades by two rating agencies didn’t help, nor did a big, unexpected loss for the September quarter.
Its shares plunged 16% on Friday in New York to $US1.20, after having briefly dipped below $US1 earlier in the day.
And its five-year bonds tumbled to 49 cents, according to US media reports, which is a very bad sign.
Bloomberg, the Financial Times and the New York Times all reported that MF Global executives spent the weekend finding a buy of the business by Sunday evening and the opening of markets in Asia today (A familiar story from the GFC and 2007-8).
It has been caught up in the European sovereign debt problems that have drained its finances dry and left it scrambling for a buyer, or face bankruptcy in the next couple of days, according to US and European media reports. It has a large Australian business as well (http://www.mfglobal.com.au/).
Its problems have been overwhelmed by the events in Europe, but last week reported a $US191 million loss for the third quarter after its credit rating was dropped to junk status. It was also reported that it had drawn all of its credit lines totalling $US1.3 billion.
Both the rate speculation and problems at MF Global will have a bigger immediate impact on the local market, investors and economy than the higher profile Qantas dispute, which is a mad mix of politics, industrial relations, ego and finance.
That’s not to downplay the Qantas brawl, but shareholders in the airline, travel groups like Webjet and Flight Centre and in airline rivals like Virgin Blue and Rex, will be impacted for good or for worse.
But the Qantas situation is a developing story that recalls memories of the waterfront dispute in the late 1990s and the pilots’ stroke of the late 1980s.
But the media reports have so far not looked at the company’s financial position.
Ignore the comments about losses and the profit for the 2010-11 financial year and concentrate on the huge dollop of cash the airline owned at the end of June: just over $3.7 billion, up from $3.5 billion at the end of the 2010 year.
Qantas’s labour bill across the empire was $3.7 billion and fuel was $3.6 billion in 2011.
Qantas has been building this cash cushion for years: originally there were claims it would be used by former CEO, Geoff Dixon, whom many unions and other critics claimed would ground the airline and take on the unions.
The claim was that the cash cushion was being built for that purpose, but nothing happened during Mr Dixon’s term except a lot of noise and rhetoric from all sides.
Qantas will have a lot of outgoings, but it will still have some revenues coming on from maintaining Jetstar and Qantas link businesses, as well as its ground transport business, but that will also be impacted by the shutdown as those planes which carry freight, won’t be flying.
But Jetstar and QantasLink will make more money because more seats will be used, super deep discount fares will slowly disappear and so-called revenue yields (or the amount of money made from carrying each passenger) will improve.
If it wants to, it can keep Qantas planes grounded for weeks, and while it would incur losses, it would not kill the company financially.
Qantas shares fell 2.5c on Friday to end the day at $1.54 after the noisy and at times bitter AGM in Sydney which saw very strong support from shareholders for the board and management of the airline.
The shares will be sold off by nervy investors today, regardless what the state of play in the dispute is.
The remuneration report, which details of Alan Joyce’s pay package, was approved by an overwhelming 96% of shareholders, hence the union threats to step up the dispute and the board decision on Saturday to back Mr Joyce’s decision to ground the airline.
Virgin Blue shares eased half a cent on
