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Qantas paid Jetconnects' bills, hearing told
Marcus Priest, Mark Skulley and Lisa Allen


A New Zealand subsidiary of Qantas Airways that employed pilots had no bank account of its own and relied on its parent to pay all its bills, according to evidence in an industrial dispute between Qantas and a pilots' union.

Jetconnect was established by Qantas in 2001 to operate domestic flights in New Zealand, but has since taken over most of the parent's trans-Tasman flights.

The Australian and International Pilots Association has a long running case before Fair Work Australia and is arguing that Jetconnect staff should be covered by the same award as Qantas short-haul pilots.

Evidence has emerged in hearings that Jetconnect lacked accounts. Qantas has claimed Jetconnect is a New Zealand operation with New Zealand employees and is not controlled by Qantas.

The Australian Council of Trade Unions has intervened arguing that Jetconnect is a “sham arrangement”, which disguised the fact that the true employer of the New Zealand pilots and crew is Sydney-based Qantas.

“This is an important case that would set a precedent against Australian companies seeking to avoid Australian awards and labour laws by setting up shell companies whether in Australia or offshore,” said ACTU secretary Jeff Lawrence.

The outcome of the case is crucial for Qantas, which has been open about setting up offshore bases for pilot to help fight intense international competition and has been lobbying the federal government in recent weeks. Pilots based in Singapore, for example, are used by Jetstar, Qantas's fast-growing budget carrier.

It emerged at the Fair Work hearing last week that Jetconnect's chief executive, Paul Daff, had little control over his company's operations and Qantas moved money in and out of its accounts without consulting Jetconnect.

Asked about a one-off dividend of $67 million Jetconnect is reported to have paid Qantas in January, Mr Daff said no money was transferred and he did not have any role in determining the dividend.

“Ultimately the vast majority of it would have come from Qantas,” Mr Daff said. “It was a book entry.”

He also conceded that Qantas paid Jetconnect pilots their wages directly. Qantas owns all the Jetconnect aircraft, and the subsidiary's employees were trained in Melbourne by the parent company.

Flight planning was contracted to Qantas by Jetconnect. The parent paid all the bills for its subsidiary and set its budget.

“The physical cash is paid by Qantas and we process it into our accounts,” Mr Daff said.

Pressed for details of the company's bank account Mr Daff said he was unable to say how much money was in it. Nor was he able to name all of the companies three directors, who are Qantas executives, and he conceded he was unaware the company did not have its own website.

“But I am separate from Qantas” Mr Daff said.
“We're a wholly-owned subsidiary, but on a day-to-day basis we're managed and operated independently.”

Qantas regional general manager for New Zealand, Grant Lilly, conceded that Jetconnect did not have its own bank accounts and employee entitlements were accounted for as liabilities in Qantas's account.

Mr Lawrence said the evidence showed that Jetconnect was not a real airline. “It is a subsidiary wholly owned and controlled by Qantas – a shell company in other words,” Mr Lawrence said.

“By using this sham arrangement, Qantas is claiming to be entitled to pay wages that are less that the award, and almost 40 per cent lower than they would be obliged to pay under the Qantas [enterprise] agreement.

“This is despite the fact that the evidence shows that the pilots are trained by Qantas, wear Qantas uniforms, and fly Qantas planes on Qantas routes bearing the Qantas logo, Qantas even pays the pilots their wages direct into their bank.”

Yesterday, Qantas chief executive Alan Joyce said the pilots association had gone too far in its campaign.

“It's a normal course of industrial relations but that's becoming very personal, I think it's very aggressive and I think it's very over the top,” Mr Joyce said.

“I think it takes the industrial relation discussion to, unfortunately, a new low.”

A Qantas spokesman said the ACTU knew full well that “Jetconnect is a New Zealand-based airline, with New Zealand pilots flying aircraft on the trans-Tasman route under a collective agreement made with the NZ pilots unions”.

Workplace expert Andrew Stewart said the Fair Work Act applied to employees working in Australian, including if they worked for foreign corporations, and applied to Australian-based employees who worked overseas for an Australian employer.

Professor Stewart, of the University of Adelaide, said the law did not apply to foreign workers who were hired and based overseas, even if their employer was in Australia. It also did not apply to workers who came to Australian to perform their duties.

In some cases, foreign crew of ships in Australian waters are covered by the Fair Work Act, but only because of special regulations.

----------------------------Breakout box from article---------------------
Running on empty
Cross examination of Paul Daff, chief executive of Jetconnect, a Qantas subsidiary in New Zealand, on February 3
Pilots Association barrister ARTHUR MOSES, SC Paul Daff

How many bank accounts does it have? I believe it has one.
With which bank? I believe it is with the Bank of New Zealand.
When you say you believe, do you know for a fact? No, I don't
Are you a signatory to that account? No, I'm not.
Who is a signatory to that bank account? My finance manager.
Do you know how much money is held in that account? No, I don't.
Have you ever asked about how much money is in that bank account? No.
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Well that explains why a ZK registration aircraft can have "spirit of Australia" written on the side of it then.......

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If Qantas should win this case, its a green light to companies to use the same loophole, leading to tax leakage from both personal & company tax. How long will the Federal Government sit by and watch its revenue drain with the baby boomers starting to retire? Not long I suspect.

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Running on empty
Cross examination of Paul Daff, chief executive of Jetconnect, a Qantas subsidiary in New Zealand, on February 3
Pilots Association barrister ARTHUR MOSES, SC Paul Daff
How many bank accounts does it have? I believe it has one.
With which bank? I believe it is with the Bank of New Zealand.
When you say you believe, do you know for a fact? No, I don't
Are you a signatory to that account? No, I'm not.
Who is a signatory to that bank account? My finance manager.
Do you know how much money is held in that account? No, I don't.
Have you ever asked about how much money is in that bank account? No.

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“I think it takes the industrial relation discussion to, unfortunately, a new low”

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If all Qantas subsidiary employees were paid at mainline rates then the whole group would be bankrupt within a year, and certainly could not compete with the domestic or international competition

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Fundamentally this is the same issue as Jet* and Qlink - they operate at a much lower cost base than mainline and so make more money and remain financially viable in the process.

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