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Focus on labour: working to rule

As airlines continue to expand outside their home markets, David Knibb questions whether they can they solve their differences with unions over offshore bases, affiliates and alliances?

In an article that reads like a lawyer's brief, Duane Woerth argues that globalisation makes it imperative to confirm that US labour law applies to foreign-based crews of US airlines. That was 10 years ago, when Woerth was president of the Air Line Pilots Association. Today he is US ambassador to ICAO. But the issue of what law controls union representation, collective bargaining, work conditions and other labour issues for US airline crews who work overseas is still unresolved. That is partly because the lawsuits posing this question have been decided on other grounds, and partly because few US passenger airlines have picked a fight over it. But the issue still lurks in the background and the uncertainty remains.

Nor is the answer clearer overseas. Professor Brian Havel, director of DePaul University International Aviation Law Institute in Chicago, admits that airline labour law is "complicated and far from settled". The law of a carrier's home state should control, he argues. But cross-border ownership may complicate this, Havel warns. A foretaste of this can be seen in Europe, where airlines can establish themselves anywhere in the EU, even though the EU "is yet to develop common labour regulations".

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Several disputes highlight Europe's problem. British Airways created OpenSkies, a wholly-owned subsidiary offering all-business class flights to the USA. Taking advantage of establishment rights enshrined in the Treaty of Rome and the right to serve the USA from any point in the EU, BA based OpenSkies in Paris. BA's pilots' union sued, claiming UK labour law should still control, but eventually dropped the case fearing that it would degenerate into an endless series of appeals.

When Lufthansa created Lufthansa Italia, the wholly-owned Italian unit hired crews under a new contract. Lufthansa's pilots expressed their concern: "Growth is happening everywhere around Lufthansa - Aerologic, Air Dolomiti, Lufthansa Regional and Lufthansa Italia - but not within our company. Lufthansa mainline is shrinking. We cannot support the idea of a new 100% Lufthansa airline in Lufthansa colours not operating with Lufthansa personnel."

Ryanair may be the world's only airline to declare that the labour laws of its domicile should trump laws elsewhere. Because Ryanair uses bases throughout its network, it has brought this issue to the fore. It lost a case by its Belgium-based pilots, who argued successfully that they were entitled to certain protections under Belgian labour law, even though Ryanair is licensed in Ireland.

Ryanair has also just closed its only base in France, at Marseilles, after French authorities began legal proceedings seeking the payment of income tax in France by Marseille-based Ryanair staff. The Irish carrier's chief executive, Michael O'Leary, argued his Marseilles crews are "mobile transport workers" under EU law, not subject to French pension rules. "These are not French jobs, but rather Irish jobs on Irish aircraft, which are defined by EU regulations as Irish territory," O'Leary insists. "All these people pay their tax and social insurance, in accordance with EU regulations, in Ireland."

French member of European Parliament Jean-Luc Bennahmias disagrees. The rule on mobile workers, he argues, only applies to workers "temporarily detached in a state other than where they usually work. The employees of Ryanair are based in Marseilles. They cannot be regarded as detached workers from Ireland working in France."


The underlying problem, says Martin Chalk, president of the European Cockpit Association, is that the EU evolved from efforts to create a common market for European businesses. It succeeded, but that market still has 27 different sets of labour laws. A few companies have sought to exploit this.

Chalk believes that rather than try to rewrite 27 labour laws, there should be one EU rule for all mobile airline employees. The law of an airline's domicile, he says, should control traditional rules for the right to organise, collective bargaining, and the like. Conversely, the law of an employee's base should control pension contributions and similar social obligations.

Would airlines accept this? Chalk predicts most would, because it would substitute a predictable system for the present chaos. An end to this chaos, he suggests, might even convince US unions to relax their resistance to changes in airline ownership and control. "Until we clean up our own house," Chalk says, "I would never urge our American colleagues to accept foreign stakes in their airlines. They would simply be importing our mess."

On the other side of the globe, Australia is showing once more its propensity to experiment with new approaches.

The Qantas "two brand strategy", with Jetstar as its low-cost unit, has followed the pattern of BA's OpenSkies and Lufthansa Italia - a wholly-owned subsidiary avoiding the parent airline's high labour costs. As a result, Jetstar's costs are 45% below those at Qantas.

But Jetstar itself is not the focus of the most recent and controversial experiments. A storm has erupted over outsourcing Qantas work to other units, mainly offshore entities that fly routes into Australia that Qantas formerly flew out of the country.

Jetconnect was the first of these. A New Zealand subsidiary of Qantas employing staff at New Zealand rates - some 40% below Australian rates - Jetconnect was formed for Qantas domestic flights within New Zealand, creating little stir. But a year ago, Qantas started using Jetconnect crews on Qantas flights operating in both directions between New Zealand and Australia.

According to the Australian & International Pilots Association, the union representing Qantas pilots, Jetconnect now crews 154 Qantas flights a week between Australia and New Zealand. Flight numbers, schedules, livery, uniforms and other branding show these as Qantas flights, but Jetconnect operates them.

"Qantas is offshoring trans-Tasman flying via its offshoot Jetconnect," complains AIPA president, Capt Barry Jackson.

The Jetconnect dispute has mushroomed into a major lawsuit before Australia's labour court. Qantas claims that AIPA lacks standing to challenge the labour terms for staff employed in New Zealand, but the court has disagreed and set the case for trial in February.


Qantas has extended the Jetconnect model to a Singapore affiliate in which it owns only 49%, Jetstar Asia. Last June, Jetstar was debating where to deploy two Airbus A330-200s on order by Qantas, ultimately choosing Singapore for operation by Jetstar Asia. It used the first of these, which arrived in December, to launch flights between Singapore and Melbourne - a route already served by Qantas. Qantas has not cut capacity, but AIPA argues that if the route can support more flights, and if Qantas is buying the aircraft to fly them, they should be flown by Qantas. Jetstar Asia's pilots, based in Singapore, work on individual contracts at rates lower than Australia's. "We are very concerned that Qantas, through its offshoot Jetstar, is offshoring more Australian jobs," AIPA says.

The Singapore flights to Australia are only part of AIPA's worry. Jetstar is building a Singapore hub to extend routes into Asia and on to Europe. It plans to base the first Boeing 787s delivered to Qantas in Singapore. If Jetstar Asia flies these routes, not only will Qantas pilots lose out, but so will Jetstar pilots. Qantas chief Alan Joyce defends the use of offshore entities. New Zealand pilots operate more than 60% of the trans-Tasman flights, he explains, and Middle East pilots another 12%. Jetconnect crews, he argues, allow Qantas to compete.

As for Jetstar Asia, Joyce says "it is just crazy" for unions to think Jetstar Asia can hire Singapore-based pilots on Australian terms. That would make it uncompetitive against rivals like Tiger and AirAsia. "It is an Asian carrier, operating in an Asian environment," he insists.

The latest and biggest part of this dispute is not about sending jobs offshore, but bringing offshore workers onshore. Jetstar has set up a new division for pilots who now fly for New Zealand's Jetconnect, Singapore's Jetstar Asia and Vietnam operation Jetstar Pacific. In this group, they could be employed to fly domestic Jetstar routes within Australia.

Jetstar chief executive Bruce Buchanan admits this new division, called Jetstar Group, will employ foreign pilots to fly within Australia. "We have cut down the walls that existed previously between the different pilot groups," he explains. "They have always been entirely separate up until now."

Neither AIPA nor the two unions that represent Jetstar pilots see it this way. They see it as another device to undercut the already lower pay and status of Jetstar pilots. Buchanan promises that "anybody employed in Australia would be subject to Australian workplace laws", but union officials claim foreign pilots would only receive the minimum award set by the government, not higher rates set by Jetstar's pilot contract. The dispute has spawned a senate inquiry and heated public exchanges. Local pilots are threatening industrial action, international pilot unions are calling for boycotts.

"Not just airline unions, but also other airlines around the world, are watching with interest," says AIPA's executive director Philip van den Heever. Part of the problem, he says, is that Jetstar's pilot contract contains no scope clause. But he also blames the lack of an Australian ban on double-breasting, a company practice of creating non-union alter egos to avoid union rules. Finally, van den Heever argues, Australia needs to clarify that crews "employed - no matter where they are based - by an Australian company, performing Australian work, should be governed by the Australian workplace laws".

Japan Airlines, as part of its restructuring, is talking to Qantas about modelling a new low-cost carrier after Jetstar. If the two-brand strategy works for Qantas, says an executive from the airline, it could work for JAL too. Conversely, van den Heever warns about what he calls "the Jetstarisation of the airline industry".

All these skirmishes may be a prelude to the bigger battle yet to come. As more airlines gain approval for "metal-neutral" alliances, where they can switch around aircraft on shared routes, ALPA in the USA worries this new flexibility could be used to skirt labour obligations.

It has drafted a bill in Congress that would direct the US DOT to require in an alliance that US carriers comply with US labour law to the same extent as the US portion of their revenue split with alliance partners. This way it would not matter how an airline deployed aircraft in an alliance, ALPA claims, because it would make labour relations "metal-neutral" too.

Whether the USA will enact such a law could be a test of how willing airlines and unions are to resolve the uncertainty over which laws control the inherently mobile work of flight crews.

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