Qantas has lost its appeal against a Federal Court decision that found the outsourcing of about 2,000 ground crew workers was illegal.
But the company now plans to appeal the landmark case to the High Court.
If it loses it could be liable for hefty costs including compensating the sacked workers as well as facing penalties.
Last year, in one of the largest reinstatement cases ever heard, the Federal Court found in favour of the Transport Workers Union (TWU) against Qantas in challenging the outsourcing of about 2,000 jobs by the airline.
In August 2020, Qantas revealed it would be outsourcing its ground handling operations at 10 Australian airports to third party contractors, and as a result, 1,683 employees lost their jobs.
It found Qantas' decision to outsource the baggage-handling and cleaning jobs was in breach of the Fair Work Act.
Qantas appealed that decision, but the Full Federal Court on Wednesday dismissed the airline's attempt to overturn a ruling that it sacked workers illegally.
Qantas says it will be seeking to appeal the judgement by the Full Federal Court to the High Court.
"Qantas has always said the decision to outsource our ground handling function was based on lawful commercial reasons in response to the unprecedented impact of the COVID crisis," the company said in a statement.
"Prior to the pandemic, Qantas was actively recruiting into its ground handling function and investing in new equipment — a sign that we had no intention of outsourcing."
Further remedy hearings will now take place to determine the compensation Qantas may have to pay to workers, as well as possible penalties for the illegal sackings.
"Today's judgement does not mean Qantas is required to pay compensation or penalties," the airline said.
"We will be asking the court to stay any further hearings on this issue [of compensation and penalties] until after the High Court process."
Why Qantas workers won't get their jobs back
In December, the Federal Court rejected TWU's application for reinstatement of workers' jobs.
The Federal Court judge found that if the affected employees were reinstated, Qantas would, as soon as it was legally possible, retrench them.
The Full Federal Court judges agreed, and rejected TWU's cross-appeal that the workers should be reinstated.
The TWU is now calling for a substantial compensation package for workers.
It also has called on the Qantas board to sack its chief executive, Alan Joyce, and the key decision-maker in the outsourcing case, domestic and international chief executive Andrew David.
"After a horror 18-months having lifelong careers savagely and illegally ripped away from them, workers stood tall and took on one of the harshest and most powerful companies in the country.
"Today those workers have been heard, vindicated, and celebrated for their courage.
"Qantas executives deliberately targeted and attacked workers and broke the law in sacking them to prevent them exercising their rights."
Qantas says it will fight in High Court to prove outsourcing was pandemic-related
But Qantas said the airline had three clear reasons to outsource jobs during pandemic disruptions in 2020.
These included using specialised ground handling companies that could save Qantas more than $100 million a year to use as part of its recovery from COVID, removing the need for Qantas to spend $80 million over five years on necessary ground handling equipment like tugs and baggage loaders, and allowing resources to be better matched with fluctuating levels of demand.
It said the TWU had been giving its members false hope about getting their previous jobs back, "when reinstatement was always unworkable".
It said the outsourced jobs were being done by companies that "perform the same function for most other airlines in Australia and most airlines worldwide".
It said the recent Easter incident that saw passenger travel disrupted due to ground handlers being hit by COVID-related absences, would have been the case if this work was still done by Qantas employees.
"We're seeing baggage handling largely return to normal as COVID case numbers peak and as close contact rules have now changed," the airline said.
