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Qantas will lock out all its employees covered by the agreements that are currently in dispute.
And it has grounded its entire domestic and international fleets indefinitely.
"We are locking out until the unions withdraw their extreme claim and reach agreement with us," Qantas chief executive Alan Joyce told a press conference today.
"This course of action has been forced upon us ... by the actions of three unions," Mr Joyce said.
"The ball is in their court.
"They have to decide how badly they want to hurt Qantas.
"We will provide full refunds to those who choose to cancel their flights."
Transport Minister Anthony Albanese said the government was extremely concerned about the future of Qantas, its workforce, and also the travelling public.
Mr Albanese said the government was informed by Qantas of its decision mid-afternoon and the government would be making an application to Fair Work Australia over the dispute aimed at both actions by the unions and Qantas management.
Mr Joyce said his hand had been tipped by the impossible demands of the three unions.
"They are trashing our strategy and our brand," he said.
"They are deliberately destabilising the company and there is no end in sight."
If the industrial action continued, Qantas would have no choice but to shut down its business "part by part", the chief executive said.
He believed the lock out and grounding of the fleet was the only effective avenue at his disposal to bring about a solution to the dispute.
Mr Joyce said he was sorry the course of action had become necessary but the ball was now in the unions' court.
"They must decide just how badly they want to hurt Qantas, their members ... and the travelling public," he said.
Independent Senator Nick Xenophon accused Qantas of "militant management" over its decision to ground all its planes over a long-running industrial dispute.
"In the past we have seen militant unionism, now we are seeing militant management," Senator Xenophon said in a statement.
"Alan Joyce doesn't need any help trashing Qantas' brand. He's done a pretty good job so far and this bizarre move appears to be the next phase in a plan to gut the flying kangaroo."
Senator Xenophon said Mr Joyce needed to explain how long he had been planning to ground the airline.
"When did Qantas notify other airlines to expect a sudden increase in demand and when did Qantas begin checking hotel availability in various locations around the world," he said.
Senator Xenophon urged the federal government to step in and quickly resolve the issue.
He said said he still expected Qantas management to appear at a Senate inquiry next Friday on legislation he introduced concerning the off-shoring of Qantas. "As far as I am concerned Mr Joyce can get a bus to Canberra," he said.
A Qantas spokesman said the airline’s executive and its board would not be paid during the lockout.
The airline will offer hotel accommodation and alternative flights to those who are mid-journey and cannot get home when the grounding takes effect.
There will be refunds and ticket transfers available to passengers whose flights are cancelled.
Qantas will keep passengers updated on the situation via its website, Facebook page and Twitter.
The lockout will begin at 8pm AEDT on Monday.
The airline said at 5pm AEDT today there were 64 aircraft in the air - 36 domestic and 28 international - carrying more than 7000 passengers.
These aircraft will complete the sectors they are operating and will then be grounded.
In total 108 aircraft will be grounded in 22 airports around the world.
The airline said 13,305 passengers were booked to travel on Qantas planes from overseas ports to Australia in the next 24 hours.
About 1310 international passengers may be at international airports now waiting for their flights to depart.
The Australian Council of Trade Unions (ACTU) has called an urgent hook-up of Qantas unions on Saturday night to discuss the the lock out of the airline staff and the grounding of its fleet.
ACTU Secretary Jeff Lawrence said the airline's management should reconsider their decision and get back to the negotiating table to get an agreement with their workforce.
"Alan Joyce needs to urgently reconsider this lock-out and grounding," Mr Lawrence said in a statement.
"This is a most unusual decision which is completely unwarranted, and will only hurt Qantas' brand and customers. Qantas employees are as shocked and stunned at this extreme decision as passengers are."
He said Qantas workers were simply seeking to negotiate new pay and conditions, and some guarantees from management about job security.
"But bargaining at Qantas has broken down because of management's refusal to negotiate," Mr Lawrence said.
"Industrial action at Qantas has been limited, and some unions have actually called off industrial action for several weeks, but Qantas has continued to snub its workforce.
"This irresponsible action by Alan Joyce will hurt innocent bystanders, including the travelling public and the majority of the Qantas workforce who are currently not in bargaining with management."
AAP with Alexandra Back