June to Early August 2020
113 More work was done and on 2 June, a further GMC meeting was held. A presentation was delivered entitled "Project Restart - below the wing: Australian Airports". Five options were now identified for "below the wing": Ex 1, p 1357. As to the option of "rightsizing" the workforce, for this option to be feasible, it was recorded that one would need to believe that "[s]tructural change [was] not feasible": Ex 1, p 1360.
114 In relation to the outsourcing options, the "[t]imeline risk with employee bid process" (Ex 1, p 1360) was identified as a "con". A "protracted employee bid process" was identified on the next slide (in relation to "Industrial Response") as a risk, and that risk was identified as being high: Ex 1, p 1361. Obviously enough, that reference to a "bid process" was a reference to the requirement under the QAL Agreement that Qantas undertake an IHB. Despite any evidence given as to a lack of recollection or otherwise, I am confident that in these respects this document reflected the contemporaneous views of Mr David, Mr Jones and Mr Hughes (who all attended the relevant part of this meeting, though Mr Hughes apparently observed remotely). Given that there was a vanishing window of opportunity to implement any outsourcing of ground operations, it is unsurprising that the need to undertake the IHB process as required by the QAL Agreement, if it was allowed to become protracted, was conceptualised by Messrs David, Jones and Hughes as a timing risk. All options remained open, but I also find that at this stage they all considered that an outsourcing option would meet the two-year costs target but that "rightsizing" the workforce would not. Further, partly as a result of this view, they believed (provided structural change was possible), that an outsourcing option was preferable than "rightsizing" the workforce. The only real issue was whether it was too risky.
115 These conclusions accord with the terms of the document and the inherent probabilities, despite any reluctance by any of the witnesses to concede that these were their considered views at this time.
116 On 11 June, Qantas received a detailed advice from Mrs Justine Oldmeadow, an industrial relations consultant, regarding the industrial risks of outsourcing ground handling operations. Mrs Oldmeadow apparently worked with her husband, Mr Ian Oldmeadow, in a company conducting a business known as "Oldmeadow Consulting" and had provided industrial relations advice to Qantas for some time: T426.31-9. It appears from the evidence of Mr Hughes (T146.17-24), that the purpose of procuring the Oldmeadow advice was to assist in assessing implementation risks of outsourcing options ahead of the 15 June GMC meeting (in circumstances in which one outcome of the 2 June GMC meeting was that further analysis of the extent of risk be undertaken).
117 Following the order made for standard discovery, this document was listed in Part 1 rather than Part 2 of Qantas' verified list of documents. At the time of its creation, however, it was marked as a "DRAFT FOR THE PURPOSES OF LEGAL ADVICE V1". In the absence of evidence to the contrary, I assume that the author mistakenly considered, at the time the document was created, that it was a privileged communication. The document was sent to Mr Jones who forwarded it on to Mr Hughes, who sent it to Mr Nicholas. It was in the following terms (Ex 1, 1524-7):
[UNION] REACTION
This paper identifies the likely reaction of the [Union] to an announcement to potentially outsource the entire QF below wing operation.
The number of employees affected is split across two companies and two Enterprise Agreements:
QAL - 1078 employees, 95% full time and union membership close to 100%. EBA opens 31/12/2020
QGS - 1632 employees, 99% part time and union membership around 50% (TBC). EBA opened 9/19/20
QF's below wing workforce is an important membership base for the [Union]. Employees are at fixed locations and easier to organise than the [Union]'s historic membership base of Truck Drivers. However, the [Union] has not been able in recent years to organise within outsource providers as effectively, although it is slowly increasing membership in these companies.
Should a decision be made to outsource all of the below wing operation this would represent the largest Compulsory Redundancy (CR) programme of a single blue collar work group and the largest outsourcing programme ever undertaken by Qantas.
The [Union] will campaign strongly on multiple fronts against any proposal to outsource the below wing work in Qantas. The fronts will be:
• Industrial
• Political
• Public
For [Union] Legal reactions refer to separate legal advice.
Industrial
Separate advice is being prepared on legal issues associated with any proposed outsourcing. The [Union] will likely seek to utilise every legal avenue to delay and/or prevent implementation of any outsourcing and/or embarrass QF. In addition to any legal issues concerning the reasons for outsourcing (see legal advice), consultation with the [Union] is required on major decisions and there is a requirement to consult on CR's. There is also a provision in clause 11 of the QF TWU EBA that requires application of a protocol for pre-decision consultation and in-house bids in circumstances where the Company is considering outsourcing. The [Union] will undoubtedly use all these provisions to frustrate and attempt to delay the process.
The QGS EBA is open. Technically the [Union] can seek a Protected Action Ballot. However, it is possible that the [Union] may instead opt for a covert industrial campaign, particularly with employees on Job Keeper. For example, employees Stood Up to work may call in sick at the last minute. This will be hard to manage during the Pandemic, because unlike Blue Flu (calling in sick as part of a campaign while the operation is normal), the attitude of the Fair Work Commission to identifying such action as unprotected industrial action during the Pandemic is not clear cut. The advantage for the [Union] and employees is that the operation is impacted but employees do not lose money. Evidence of this type of covert action was apparent in some Ports during the 2019 Christmas TWU industrial campaign in JQ.
…
Conclusion
The [Union] has nothing to lose in taking [Qantas] on over outsourcing and in the current environment may well win significant public sympathy. The Federal Government is trying to create an ongoing working arrangement with the ACTU and is facing a deep recession and high unemployment. ALP State Governments are very reactive to union concerns and may well weigh in on the side of the [Union].
Ultimately if the legal and commercial reasons support outsourcing all the below wing in [Qantas], then it will succeed. However, the environment in which any outsourcing takes place needs to be carefully considered, both in terms of the impact on the timing of achieving the outsourcing, and current Government and Public attitudes.
(Emphasis added).
118 It is not entirely clear to me whether Mr or Mrs Oldmeadow, or both, was the author or authors of this advice and the extent of their contemporaneous involvement with Qantas employees in the consideration of the pros and cons of the outsourcing proposal. There was no mention at all of their involvement in the affidavit evidence read by Qantas (nor of the involvement, as it happens, of Qantas' Executive Manager of Industrial Relations, Ms Millen, who was likely involved in obtaining industrial relations advice from Oldmeadow Consulting). Qantas submitted (QFS1 [90(f)]) that this is understandable because when it came to Qantas preparing its affidavits, there was no suggestion that the Union would contend that the views of Oldmeadow Consulting or Ms Millen were of any relevance to the making of, or the reasons for, the outsourcing decision. This is correct so far as it goes, because the involvement of these people (like the extent of the contemporaneous involvement of specialist legal advisers) only became apparent upon receipt of a list of documents and inspection by the Union of non-privileged documents discovered because of the standard discovery order (and, as to legal advisers, upon later particularisation of the privilege claim), but that somewhat misses the point.
119 It emerged in cross-examination (T553.31-554.2) that Mr Jones received a draft of the Oldmeadow advice and, with regard to the draft, asked for some additional matters to be addressed. That communication was not in evidence, although it was inferentially referred to at Ex 1, p 1523. Curiously, as noted above, the document produced on discovery and provided on 11 June was marked as a "DRAFT FOR THE PURPOSES OF LEGAL ADVICE V1" - but it may not have been the first version. Qantas, in response to a query made through my Associate that was received into evidence as Exhibit Q, confirmed that a number of copies of a draft of this document had been discovered which had been sent the day before, but had been asserted to be "subject to a claim of legal professional privilege, and as such were withheld from production": see Ex P, Part 2, items 19, 20, 75-6, 81-4 and 88-9; Ex Q. Notwithstanding that a later version of the document was produced, this claim for privilege was not challenged by the Union and it is unclear on the evidence how the version in evidence differed in material respects, if at all, from the draft originally sent to the solicitors. Again, it would be erroneous to speculate in this regard.
120 Mr Jones also apparently had one telephone discussion with Mrs Oldmeadow (T554.6-9) and a telephone conversation with Mr Oldmeadow whereby Mr Jones was taken through the paper: T554.11. What version of the paper was discussed is a little unclear. What is clear is that, at some stage, Mr Oldmeadow was apparently somewhat firmer in expressing his views than the views as recorded in the document sent by Mrs Oldmeadow. He told Mr Jones that the outsourcing proposal was "high risk": T554.44. Indeed, according to Mr Jones, Mr Oldmeadow "was very concerned about the overall risks", was a proponent of ways of reducing the risk, and this led to a conversation around adopting option 3 (T556.4) (which was outsourcing the fleet but "rightsizing" the "Ramp and bag" (Ex 1, p 1360)).
121 Mr Oldmeadow apparently had various meetings in relation to the outsourcing proposal throughout 2020 (T555.16) although his attendance, the nature of his contribution, or any detailed expression of any reservations he had, as Qantas' industrial relations consultant, about adopting a strategy he was "very concerned about" and regarded as "high risk", was not addressed in the affidavit evidence and, moreover, was not the subject of any contemporaneous business record (other than the somewhat less than definitive views sent by Mrs Oldmeadow, a first version of which had been sent, as a draft, to the solicitors).
122 It may be that Qantas thought that the views expressed by their industrial relations consultant and the extent and nature of his dealings with Mr Jones and others was not material when evidence in chief was filed (as being irrelevant to a fact in issue). It is unnecessary for me to say anything about such a view, if it was held. It may also have been usual practice or happenstance that the conversation or conversations in which Mr Oldmeadow expressed his concerns as to the outsourcing being high risk (and any reasons why) were not thought sufficiently important to record in writing. Again, it is unnecessary and inappropriate to speculate. However, with the evidence in the state it is, I have a sense of disquiet that I do not fully understand the true extent and nature of the dealings between Oldmeadow Consulting and Mr Jones or others during this period and, in particular, what precisely was said by Mr Oldmeadow and to whom about the risks and rewards of outsourcing (or alternate options) and when it was said.
123 The Oldmeadow advice is useful, however, as it does at least represent a snapshot of the types of issues then confronting Qantas in assessing whether to proceed with outsourcing (being the only option, in whatever form, that could deliver the two-year costs target). Despite any evidence adduced to the contrary, my strong impression from the terms of the documentation is that although clearly no final decision had been made (and all options were still open to be considered), an outsourcing option continued to be preferred at this time by Mr David, Mr Jones and Mr Hughes, subject to detailed consideration of the sort of industrial risks identified by Mrs Oldmeadow and the legal risks, in respect of which, advice was being sought from highly experienced industrial solicitors. And, irrespective of any conditional preferences of Mr David, Mr Jones and Mr Hughes, no final decision could be made, of course, before the IHB timeline risk was managed and Qantas ensured that the Union, as Mrs Oldmeadow had warned, did not use the provisions providing for the IHB "to frustrate and attempt to delay the process".
124 Further, the Oldmeadow advice by Qantas' industrial consultants, which made reference (Ex 1, p 1524) to the QGS Agreement being "open", suggests that this was at that time a matter of some perceived importance. Of course, the risk of "open EBAs" and (at least inferentially, the capacity of employees to bargain and take protected action) was on the radar from at least 20 May as between Mr Jones, Mr Hughes and Mr Nicholas (Ex 1, p 1176), and was apparently referred to in the GMC meeting on 2 June: Ex 1, p 1361. The Oldmeadow advice was received a little over a week later.
125 The advice to the industrial and legal risks of the outsourcing proposal for ground operations was evidently a topic of intense interest. I have already detailed the dealings, such as they are revealed in the evidence, with Mr and Mrs Oldmeadow. It is a little unclear, and not particularly important, as to when precisely specialist industrial solicitors were retained, although there are emails and "PowerPoint presentations" over which a claim for legal professional privilege is maintained dating from late May: see, for example, Ex P, Part 2, items 226-8. As noted above, what is clear is that Mr Hughes spent a whole day with Freehills at around this time: Ex 1, p 1616. In any event, a flurry of relevant communications immediately followed the receipt of the Oldmeadow advice and, I infer, legal advice as to industrial matters.
126 The day after the Oldmeadow advice, on 12 June, Mr Hughes emailed Messrs David and Jones a copy of a presentation sent "ahead of discussion at 4pm" that day: Ex 1, p 1587. On the slide canvassing risks of a "full tender" there appeared as a third point "TWU Campaign" which would cause "damage to brand and reputation": Ex 1, 1593. Consistently with the Oldmeadow advice, that risk was expressed as "high" and a "mitigation" was expressed to comprise "Corporate comms about the 'Case for Change'; explanation of outplacement services and EAP support being provided in addition to EBA redundancy provisions." Later there appeared a slide titled "TWU narrative likely to be: proposal creates insecure work and casualisation, a "race to the bottom" and is an attack on the TWU" and the "Legal/Industrial" Risks and Response were redacted for legal professional privilege: Ex 1, p 1595. Another redacted slide was titled "Key determinant of the timeline is the QAL in-house bid", but the contents of that slide were also redacted for legal professional privilege (Ex 1, p 1597) (it appears a form of that presentation was later delivered on 15 June at the GMC meeting referred to below).
127 The next day, on 13 June, Mr Hughes emailed to Messrs David and Jones a document with a draft of Mr David's talking points for the GMC ahead of his discussion with Mr Jones about that meeting: Ex 1, p 1616. That document appeared as follows:
The reasons to consider full exit
- This topic is really a trade-off between risk and reward at an aggregate level for the company
- Last GMC we outlined the benefits and risk areas and were asked to answer the threshold question regarding legal confidence
- Spent a day with Freehills
- Operational risk is low as we have xx% domestic market and % of total by year end and medium timeline case supports doing it this year
- There is a significant financial prize of ~$100M per year vs. Option 1 (our base case). This consisted of $57M in Airports but also $42M+ (validated as at least that) in services across GSE, WFP etc. & it avoids the need for $8OM capital in next 5 years.
- Airlines globally are signalling they will be smaller, lower cost and more focused; it is not business as usual after a demand shock of this type with such a low revenue outlook
- There is also a strong argument we need to prepare for a resurgent domestic competitor
o VA entered administration ~20% lower unit cost than Qantas BTW (GO & Fleet)
o Post administration we should expect PE owners to pursue aggressive further cost reductions; particularly in non-core areas of their business
o To this end, post administration Virgin may have/or perceive to have greater societal 'permission' for more systematic change than Qantas
o Virgin start from a structurally better place with ground ops inhouse for DOM only in SYD, MEL, BNE & ADL. Virgin subcontracts all other DOM ports, all INT and cleaning
- The TWU will run a highly aggressive and public campaign but we think that is likely there will be significant campaigns regardless of the choices we make given Kaine's campaigning position
o As an example, the TWU were the only TU to criticise our decision to offer 4 weeks negative leave for employees during stand down calling it 'wage theft'
So what are the main reasons not to do this?
- It is inconsistent with the "retain as many jobs as we can" mantra and communications
- The size of the job losses (2700) sticker shock
- CR's opposed to VR's for our people
- Government risks are a problem that need to be carefully weighed. Large scale job losses are inconsistent with Job Keeper and will create a very challenging Government dynamic.
- There are a few points that will support the case but this risk still remains High [sic].
o Aviation jobs we exit will remain in the industry and will not be offshored
o We will not have enough work for people for some time nor the same size business
• In our rightsizing base case we are assuming up to 1000 redundancies
• There is a further ~1000 (seems too high ?) who will have no meaningful work for up to two years - potentially without JK from October
• People affected are likely to face a stand down indefinitely with no pay and no JK. A redundancy is preferable in that they receive severance and can seek new employment immediately. Considering these jobs are low paid, unskilled lab our, this is a kinder approach.
Option 1
- Financial targets are not achieved in Y1 or Y2 and there is a further downside risk of $28M if we cannot manage our surplus (will be very difficult with TWU to agree reduced hours)
- We will be oversupplied until at least 2022 so limited options to bring in 3rd party
- QGS EBA is currently open and the TWU are unlikely to want to close it quickly. The QAL EBA opens 1 January 2021 and there is a risk the two agreements are open simultaneously
o It will concentrate power back into the TWU early in the new calendar year when we are growing domestic demand back and Virgin is potentially up on its feet
- TWU will run an aggressive campaign and will likely attack international stand downs which may have broader Group implications
Option 3
- Given the need to rethink our model we think there is a defendable argument to exit from Fleet Presentation in the 4 ports we operate
o It's absolutely non-core, almost all Tier 1 airlines don't do it including Virgin
- It is a better performing financial and capital efficiency option than the base case and is a structural step forward in exiting Ground Operations
o Andrews and Ian see this as lower risk as it impacts xxx roles and the cleaning function is less central to the TWU agenda.
o As discussed with Andrew(s) McGinnes and Parker whilst risks clearly remain, the PR and Government risks are assessed to be lower than full exit
Other options over time ……
Details of SIT here please .... (Not sure I want to give option on QGS by port) and QGS model options ........ 600 roles, when, how, trigger that its ok etc.?
(Italicised text appeared on the original document in red).
128 Mr David responded on 14 June to that email from Mr Hughes, stating "Excellent job. Read it thoroughly. Nothing I would change or add": Ex 1, p 1742. Everyone relevant, it seems, continued to be on the same page.
129 The same day, on 14 June, a further advanced draft of Mr Hughes' 13 June document was sent by Mr Jones to Mr Finch. This time the author marked the covering email and the enclosed document "Privileged and Confidential": Ex 1, p 1717. On 15 June, a GMC meeting was held, attended by Mr David, Mr Jones and Mr Hughes. The presentation was delivered at the meeting entitled "Project Restart - below the wing: Australian Airports". Apart from the mistaken general marking as to privilege and confidentiality, the revised document was relevantly supplemented in the following terms (Ex 1, p 1813):
The timing
- Understandably there is a desire to find an opportunity to retime this decision and find a different window. We don't think that's as real an option as we'd like it to be
- The strongest argument for 'why now' is necessity driven by COVID, and the need to rethink our ways of working to survive in a new world. That argument will erode over time
- The longer a decision is deferred the greater the increase in operational continuity risk; we are also unlikely to make significant change during 2021 with an open QAL EA
- If we do not make the decision to exit at this time and select Option 1, it is hard to see the conditions in which we would ever have the opportunity to execute full exit again
…
(Emphasis added).
130 As to Option 1 or Option 3 (both of which did not involve outsourcing the ground operations), the document provided:
Other options over time
- If we select Option 1 or 3 there is an option to exit fully from SIT late next year
- This removes a further ~650 roles and would be defendable as SIT is the only standalone international port in the network with significantly reduced flying looking forward
- Operational transition risk would be low at SIT given limited flying but a higher risk across the network given an open QAL EA, so would need to wait for closure of the EA
131 The references to the "open QAL EA" were, of course, a reference to the QAL Agreement, which was due to reach its nominal expiry on 31 December: T572.35-7. Again, this document is consistent with no decision having been made and all options being still open for consideration. However, the terms of the document fortify me in my view that Mr David, Mr Jones and Mr Hughes, who were at the meeting, considered that a one-off and vanishing opportunity was being presented to adopt outsourcing of ground handling operations and that operational risk would increase in 2021 in circumstances of "open EBAs": see also the evidence of Mr Jones at T572.35-573.25.
132 This document is consistent with what appears to me to be the views Mr Jones held at this time: (a) that the operational consequences of the pandemic presented a limited opportunity to outsource; (b) the so-described "necessity driven by COVID" provided a justification that could be deployed inside and outside Qantas, being a justification that would weaken over time; and (c) significant change in 2021 would not be likely to occur for reasons including that the QAL Agreement would have passed its nominal expiry date. In this regard, as to part of what was set out as to "[t]he timing" (see [129] above) as to option 5 (being the outsourcing option), Mr Jones' evidence (at T571.11-572.41) was:
MR GIBIAN: … The third dot point under the heading Timing, you indicate that the longer the decision is deferred, the greater the increase in operational continuity risk. And then you indicate:
We are also unlikely to make any significant change during 2021 with an open QAL EA.
Do you see that? --- Yes.
The relevance of an open QAL EA was that the Qantas Airways ground handling employees could, from 2021 onwards, take protective industrial action? --- So that's not the only relevance of an open QAL EA. Qantas doesn't make major change with open EBAs due to operational risk.
Yes. The reason why there is an operational risk with an open EBA is that the employees would be able, in that circumstance, to take protective industrial action; correct? --- No, there's a multitude of reasons for that.
Well, perhaps I will go back a step. By reference to - in operational risk, you're referring to the potential for there to be interruption in the supply of ground handling services to Qantas's flights? --- Yes.
In a manner that might disrupt customers and delay flights, etcetera; correct? --- Yes.
And one reason why there is an operational risk is that employees may withdraw their labour by taking industrial action; correct? --- That's one reason, yes.
Yes. And the capacity of the employees to do so, that is, their right to take protective industrial action would only arise after the QAL EBA had passed its nominal expiry date on 31 December 2020; correct? --- Yes.
And so the reason that you were raising there as to why it was necessary to outsource now as that in 2021, the ground handling employees of Qantas Airways would be able to take protective industrial action and that would present an operational risk to the business? --- No, because it says there, "We also are unlikely to make significant change." So it was in context that we don't make significant change while we have open EBAs.
Yes. I'm asking about that second part of that dot point? --- Okay.
Do you recall - can you concentrate your mind on that. The reason why you're unlikely to make any significant change during 2021 with an open EBA is because it would present an operational risk; correct? --- It's more than operational risk why we don't make major change during open EBAs.
One reason why you don't make operational change during EBAs is because there is operational risk because the employees are able, in that circumstance, to take protective industrial action, correct? --- That is one the reasons, yes.
…
And then the fourth dot point under the heading Timing is that you indicated that, if you didn't make the decision to exit at this time, that - and select option 1 - and instead selected option 1, your view was it was hard to see the conditions in which you would ever have the opportunity to execute a full exit again, do you see that? --- Yes.
And the reasons for that were two fold. One was that the circumstances of the pandemic would dissipate, and certainly it was hoped that the airline would be back to more usual operations, correct? --- That's a reason, yes.
Yes. And the other reason was that the - with the QAL EA open from 2021, that would prevent this course of action, in a practical sense, being implemented in the following year, correct? --- So that's another possible reason, yes.
Yes. But they're the two reasons - well, they're the only two reasons you identify under the heading Timing, correct? --- They are the only two reasons in that set of documents, yes.
(Emphasis added).
133 This evidence (and the failure thereafter to concede readily that his views as to the reasons why Qantas should outsource now was the message he was seeking to convey to the GMC) was a further example of an aspect of the evidence of Mr Jones that was troubling. It was reflective of his desire, running through his evidence, of not making any concessions he perceived were adverse to the case of Qantas; moreover, the evidence, while being given, was unimpressive. I accept the evidence of Mr Jones that operational risk is why Qantas does not make major changes affecting a relevant aspect of its workforce during open EBAs, but I also have no doubt that the most significant risk to operational disruption is because protected industrial action may be able to be taken by employees. I have little doubt that was one of the reasons in the mind of Mr Jones when he had formed the view, and communicated it to others, that if the outsourcing of ground operations was to be done, it be best done quickly.
134 On 19 June, a Qantas Board meeting was held. Discussion occurred as to the development of a three-year plan to guide Qantas through the COVID-19 crisis to recovery. In a slide deck presented at that meeting, a slide under the heading "Proposed Qantas Airports Transformation Initiatives", relevantly included the following (Ex 1, p 2010):
Industrial Risk Assessment
• Above the wing: VR expected. Agreement on surplus possible with ASU. ASU EA open
• Overall rating: [Low]
• Below the wing: TWU response to strategic review. Expected legal challenge and public brand campaign. Delays to in-house bid process. QGS EA open. QAL EA to open 1 January 21. PIA possible
• Overall rating: [High]
135 The Board meeting minutes also appeared (relevantly) as follows (Ex 1, p 2038):
GMC and Paul Jones then led a detailed discussion on the manpower aspect of the proposed Recovery Plan, including:
• a 6,000 headcount reduction (5,000 redundancies and approximately 1,000 contractors not returning). The redundancies (both voluntary and compulsory depending on work group) would arise from restructuring / right-sizing Qantas Engineering, Mainline cabin / tech crew, Qantas Ground Operations and non-operations / corporate areas;
• an interim surplus of 15,000 employees to be managed, depending on workgroup, using stand down, leave without pay, part-time arrangements and leave burn. The interim surplus will diminish over two years as the availability of useful work increases;
• the potential restructuring opportunities for the "below the wing" Qantas Ground Operations; and
• the significant risks including potential industrial action, legal challenges, political consequences and brand/reputational damage. These risks are proposed to be managed by a sub-group of GMC, who would regularly report back to the Board.
The Board acknowledged the risks of the Plan and was supportive of the proposed approach. The Board also acknowledged the significant and challenging impact of the Plan on employees and emphasised that this should be taken into consideration in all employee communications.
It was RESOLVED THAT the "Qantas Group Three Year Financial Plan" is approved.
136 Mr Jones' speaking notes for the Board meeting appeared relevantly as follows (Ex 1, p 2042-44, without alteration):
A significant opportunity exists beyond rightsizing to drive fundamental transformation BTW through outsourcing of the entire function (Additional 1573 roles as Compulsory Redundancy)
This is a non-core area of our business. There are many specialist Ground Handing and Cleaning companies. At Qantas 58 of our 68 ports are outsourced today (including all international locations). We are only one of 2 Tier 1 airlines Globally that clean our own aircraft at a turn for example.
…
While there a lot of clear pros outlined there are a number of critical risks that need to weighed up carefully before making a decision.
Government reaction to 2431 FTE redundancies (including VR) and outsourcing while Jobkeeper / retention of jobs has been such a strong mandate
The TWU campaign would be extensive and create challenges for the brand potentially leading to a British Airways level of negativity with Qantas perceived as the big bad corporate taking advantage of COVID situation and not being on Team Australia
…
Engage Government to determine likely response to outsourcing and how manageable that would be
Continue to evaluate the benefits and risks understanding how the Government, TWU, media and competitor landscape evolves - by end of July we will have a better insight to Virgin and how they will operate in the market as well as the level of voluntary redundancy demand that exists for our people.
Decision is currently planned prior to Aug 20th to align with year end results and the market announcements to be made at that time. If we proceed, it requires a formal RFP in market and an in-house bid process opportunity (in legacy EBA) enabling employees to bid for the work and therefore we would expect to transit on into early next year to enable these activities to be completed
…
The alternative is too take a phased approach, maybe by targeting a smaller footprint e.g. Exit Sydney international (only dedicated port) next year, and take advantage of the market opportunities as they become available eg Growth in certain locations. This would clearly be a much longer term strategy and process given the lack of growth potential in the foreseeable future and the legacy EBA with TWU opens early next year significantly increasing the operational risks with any transitions.
(Emphasis added).
137 References in the penultimate paragraph above were made to the requirement of the IHB process before any outsourcing decision was made, and the RFP process with third party ground handlers. The final paragraph referred to the increasing operational risk with any transition were Qantas not to pursue the outsourcing option while the bargaining for the QAL Agreement was closed.
138 It is worth pausing here to make two points. The first and more general point is that as Qantas rightly emphasises, it is important not to decontextualise what was occurring regarding any option as to ground handling operations. The affirmative case of Qantas (see the defence at [40(a)-(b)]) was that Mr David made the outsourcing decision for the reasons identified, being that the result of the decision best met what were said to be three (although they seem like five) key "imperatives" or "challenges" developed by Mr Hughes and Mr Nicholas for the Australian Airports business. These were summarised as being to: (a) achieve the two-year cost targets by reducing operating costs; (b) increase variability in the cost base; and (c) minimise capital expenditure, grow customer confidence and deliver ongoing business improvement. But the fulfilment of these perceived imperatives by this part of the business was only part of a much bigger picture being the broader three-year plan to guide Qantas through the COVID-19 crisis to recovery, the approval of which (the "Qantas Group Three Year Financial Plan"), was the subject of the resolution passed by the Board. When this is borne in mind, contrary to the submission of the Union, it does not strike me as somehow intuitively odd that the Board, and for this matter the GMC, would devolve to the head of individual business units the responsibility for not only implementing the changes perceived as optimising recovery, but also deciding upon them insofar as they related to their aspect of the business.
139 The second point is reflected in the emphasised part of Mr Jones' speaking notes. Having considered the whole of the evidence, I do not think, at this time or thereafter, there was ever any doubt in the mind of Mr Jones (or Mr David and Mr Hughes for that matter), that there were "clear pros" of implementing "fundamental transformation" by outsourcing the entire ground handling function and that this option was to be preferred to option involving "rightsizing". Despite the evidence adduced by Qantas which attempted to paint a picture that until after the assessment of the IHB in November, persons such as Mr Jones and Mr Hughes were essentially agnostic as between different options, such a narrative is entirely unpersuasive. It is no overstatement to remark that what these gentlemen were faced with was a business calamity. The option delivering the best overall financial outcome for their employer, and which was therefore perceived as best assisting the recovery of a business under extreme pressure, was the one that they wished to implement (provided, of course, it was feasible to do so). This involved the not unfamiliar exercise of weighing risk and reward. Understandably, they sought and obtained expert advice about those industrial and legal risks so those risks could eventually be properly weighed in the balance against the estimated rewards. Obviously enough this is consistent with the ultimate decision being the one which best facilitated the so-called three imperatives, but it can be put more simply: provided it was open to do so, Mr Jones, Mr David and Mr Hughes wanted to outsource ground operations because they believed it was best for the bottom-line. This is why Mr David's evidence in cross-examination, that by the time of the outsourcing proposal, a "decision" to outsource ground handling had been made, but that this preliminary view was subject to a RFP and IHB process (T729.15-7) (being a timeline risk in making the outsourcing decision), was far more compelling than any notion that the relevant participants were in a state of aloof detachment being unable to predict which of two outcomes was more likely until the IHB had been poured over and analysed.
140 Returning again to the narrative, on 25 June, Qantas announced its post-pandemic recovery three-year plan and equity raising: Ex 1, p 2056. The announcement did not make mention of the proposal to outsource below the wing operations but did mention, in broad terms, "Job losses and extended stand downs to manage long period of reduced flying (especially internationally)".
141 On 25 June, a Request for Approval regarding a redundancy programme of up to 1,211 full-time employees (a separate decision to the outsourcing decision) was executed as approved by Mr Jones, and financial approval "in accordance with the financial delegation framework" was provided by Mr Joyce. The request was also reviewed by Mr Robert De Bella (the Qantas Airlines Chief Financial Officer) and Ms Millen.
142 On 29 June, Qantas commenced a request for information process with potential third party suppliers of ground handling services. On 13 July, Swissport provided a response to that request for information, which included reference to its relevant collective bargaining agreement remaining "valid until at least January 2024" and Swissport having a "long history of highly flexible collective agreements": Ex 1, p 2303. Later in that response, and appearing under the heading "Managing Cost", was the statement that "Swissport was founded with the strategy of creating extraordinary value in ground handling … [w]ithout the burden of legacy work practices, labour agreements and demarcations": Ex 1, p 2315.
143 Around this time, GMC meetings were held, as were meetings of the Steering Committee, which was established to guide project direction, with representation from key relevant business areas: Ex 1, p 2415. The Steering Committee was comprised of seven members including Mr Jones, Mr Hughes and Ms Millen. There was also a GMC Sub-Committee, which included Mr David and Mr Finch: Ex 1, p 2508. There is no need to go into these meetings in any detail, indeed it is difficult to do so on the evidence, but a snapshot of the position as at 22 July can be obtained from a review of part of the papers for the GMC entitled "Deep Dive Topic #1 Ground Handling Strategies": Ex 1, 2455-60. Under the heading "Timeline and next steps" the following detailed table appears (Ex 1, 2457):
144 As can be seen, well prior to any formal decision being made on the proposal to outsource in August, a detailed timeline had been contemplated setting out the "key outstanding risks" to be assessed and contemplating an ultimate decision by the end of 2020 (subject to the timeline risk of the IHB process and consultation). I accept the force in Qantas contending that this is all consistent with simple good business planning, but it is also consistent with my view, that even at this stage outsourcing was highly likely to happen, provided the risks were perceived to be manageable.
145 On 5 August a GMC meeting was held. A presentation was made entitled "Integrated Recovery Program[me] Risk Review". This presentation was prepared by Mr Jones and Mr Hughes and was approved by Mr David. Among other things, the document included (Ex 1, p 2586) "Critical milestones for program[me] delivery" foreshadowing that on or about 17 August it is provided that a "QF Airports BTW - announcement" marked as "pending" would be made and (Ex 1, p 2590-1), under the heading "Group Exposure Forecast Overview - Rep/Brand Impact and Potential Response", the potential Union, Government and opposition responses were set out. I am confident that these aspects of the presentation accurately reflected the views of Messrs David, Jones and Hughes at this time. The papers on 5 August also explained that a workplace determination in 2012 "shaped Qantas' obligations to the [IHB] process", it set out the "approach to the IHB process" and the legal and industrial relations risks (the details set out for the GMC in this presentation as to the proposed approach and the relevant risks were all the subject of a claim for legal professional privilege: Ex 1, p 2675-6.
146 On 6 August, a draft "Australian Airports Reforecast" was prepared (Ex 1, p 2698), which in the comments section noted that the "FY21 Budget includes [below the wing] outsourced supplier costs [option 5]" and that the reforecast "reflects delay in [below the wing] option 5 to Dec-20". On the same day, a Steering Committee meeting was held as a presentation entitled "Ground Operations - Project Restart: Proposed implementation plan" was provided: Ex 1, p 2683. This document is heavily redacted for legal professional privilege as to the "program[me] timeline", the "strategic review timeline", the "approach to the [IHB] process in 2020" and "legal and industrial relations risk". As a consequence, although no inference should be drawn that the redacted parts of the document contain representations adverse to the interests of Qantas, it is, on the current state of the evidence, somewhat difficult to understand what was conveyed. A similar document prepared for another meeting a little over a week later (Ex 1, p 2708) sets out details for the IHB and RFP process.
147 At least by 11 August, I am satisfied that plans were well advanced for the announcement of the outsourcing proposal. It appears on this date a meeting was scheduled for ten days later with Mr Joyce apparently sending an electronic invitation to a "GMC: Ground Handling/ Project Restart" meeting proposed to last for two hours to members of the GMC as well as Messrs Jones and Hughes, and also the external industrial relations consultant Mr Oldmeadow and Executive Manager, Industrial Relations, Ms Millen: Ex 1, p 2782.