Lockout gamble

Qantas Airways, Australia’s flag carrier, played the lockout card in its labor dispute and won the first round.

The airline’s decision to ground all its airplanes Saturday in the wake of intermittent strikes by its pilots, engineers and baggage handlers was a tough, but gutsy, move.

The lockout couldn’t have come at the worst time—Australia was hosting a meeting of the heads of states of the Commonwealth of Nations, or the countries that once formed the British Empire.

The unprecedented action forced the hand of the Australian government. An Australian arbitration court quickly assumed jurisdiction over the dispute and, pending review of the case, ordered the airline to resume operations and the employees to go back to work.

The 46-hour grounding cost the airline $75 million in lost revenues. The bigger damage was on its reputation as a stable and reliable airline.

While the arbitration proceedings are ongoing, management can look forward to its airplanes taking off and landing without having to worry about pilots suddenly calling in sick, engineers dilly-dallying in their maintenance work or cargo handlers refusing to handle passenger baggage.

Barred from walking off their jobs or doing anything that would violate the return-to-work order, the labor unions must rely on the strength of their arguments to get their demands through arbitration, rather than over the bargaining table.

Negotiations

In collective bargaining, disputes, lockouts and strikes are considered measures of last resort. They are used only when all avenues for an amicable settlement of CBA issues have been exhausted.

And even if negotiations are stalemated, it is standard practice for companies, especially those with good management-employee relations, to engage in back channel or informal discussions to resolve the parties’ differences.

Unlike the management panel which takes its orders only from the company’s top brass, the union panel has to contend with internal politics in their organization during CBA negotiations.

The union president must be perceived (and appear) to be strongly protective of the employees’ interests and firm in winning their minimum acceptable demands.

The projection of that image becomes more critical if the election of union officers was tightly contested and the losing candidates are just waiting for the incumbent officials to commit a blunder at the bargaining table.

To show his devotion to the employees’ cause and not be suspected to be in management’s secret payroll, the union president must know when to raise his voice during negotiations, or threaten to walkout, or engage in other grandstanding activities.

Agreement

With no gallery to pander to, the behind-the-scenes talks enable both sides to speak up freely and to narrow down the gaps in their bargaining positions.

For this exercise to succeed, the union should not be seen to have given up on major bargaining issues or, if it concedes on some of those points, should be able to convey the impression to the members that it gained something substantial in return.

In case no agreement is reached, in spite of these efforts, either party, depending on who thinks it has more to gain than to lose, may go on strike or declare a lockout.

Both actions are based on financial considerations. By their refusal to work, the employees deprive the company of the profits it would have earned had they remained on the job.

By shutting down operations, management withholds payment of the wages that would have been paid to the employees had they not stuck to their CBA demands.

The name of the game in this standoff is brinkmanship. Whoever blinks first, or is unable to bear further the squeeze on the paycheck or financial bottom line, loses.

Consequences

Thus, it is essential that before a union orders its members to walk out of their jobs, it has sufficient “strike funds” that can help tide them over while they’re manning the picket lines.

In a lockout situation, the company should have enough money in its kitty, or available credit line, to pay the wages of the employees who will watch over the facilities and to meet all financial obligations that may become due while the company is inoperative.

The risks of a lockout go beyond unearned profits. If the company is listed on the stock market, the perception that management has thrown in the towel in its labor dispute could bring down its stock price.

No investor in his right mind would keep his money in a company that has poor labor relations policies or has failed to put in place contingency measures that can mitigate the adverse effects of work stoppage.

Worse, if the lockout is not timely and properly explained to the public, it could cause irreparable damage to the company’s reputation and may result in the loss of patronage by its customers.

Regaining investor confidence and recovering lost market share in a highly competitive market are no walks in the park. Massive advertising and concerted investor briefing sessions, even with the assistance of popular personalities or financial icons, do not guarantee results.

It is not easy to convince erstwhile loyal (but disgruntled) customers to return to the fold if a competitor has shown that it can provide an equivalent, if not better, product or service.

Those risks, however, are minimized if the company involved is a monopoly or whose continued operation is vital to the economy.

Invoking national interest, the government can, on its own or upon the request of either party, step into the picture and resolve the dispute.

If the labor problem were a blackjack game, the Australian government was “forced to hit” (or intervene) when Qantas threw the lockout card.

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