One of the world's leading airlines, Qantas Airways, is giving away free tickets in a desperate bid to win back customers hit by its decision to ground the entire fleet of aircraft in the middle of an industrial dispute.

Qantas Airways, the Australian carrier which has a business "alliance" with British Airways, said it expected to spend $20m (£12.5m) offering 100,000 return economy flights inside the country or to New Zealand.

"This ticket offer is one of a range of initiatives we will be launching as a way of saying sorry as we move forward into this period of stability," said Alan Joyce, the Qantas chief executive.

"Throughout the long period of industrial activity we have been acutely aware of the impact on our customers," he added saying this was the company's way of winning back customer loyalty.

Qantas grounded its planes to force a resolution to an ongoing dispute with trade unions over pay, conditions and job security. The shutdown stranded tens of thousands of passengers and triggered a political storm.

The government under the Welsh-born prime minister Julia Gillard stepped into the dispute and brought in workplace arbitration service, FairWork Australia, which then ordered an end to the industrial action.

The airline said it would make further announcements about compensation packages in relation to customers based outside Australia and for members of its frequent flyer programme.

The first tranche of free tickets will be available to anyone who was affected by the grounding and Qantas has promised to refund all "reasonable losses" for passengers affected by the drama.

The Australian pilots' union claims the airline is losing a "pilot a day" to rivals such as Middle East company, Emirates, and said it would have been "a lot cheaper for them to work with their workforce".

Irish-born Joyce worked at rival carrier Ansett when it collapsed in 2001, costing 17,000 jobs, and told local newspapers that the experience had scarred him: "There were suicides, that was horrendous."

He has been rounded on by politicians and the public alike, with the media dubbing him the nation's most loathed man, but Joyce said he was sick of what he described as "racist" slurs about his accent and heritage.

"I don't think there's any difference between attacking somebody because of their Irish accent and attacking someone because of their colour – they're all forms of racism," he said.

Joyce is one of a triumvirate of top Irish aviation executives alongside Willie Walsh of BA – now part of the International Airlines Group (IAG) – and Michael O'Leary, the boss of Ryanair.

The trouble at Qantas is not over yet with the ground staff union saying it is considering a legal challenge to the ban imposed on any further strike action. There have also been technical problems.

On Friday the airline was again hit by reliability worries when a flight from Singapore to London was diverted to Dubai after an engine was shut down and the incident occurred almost exactly one year after a mid-air engine explosion forced an emergency landing of a Qantas A380 jet in Singapore.

That emergency landing resulted in Qantas yet again grounding for safety checks its entire fleet of A380 aircraft each of which is powered by four Rolls Royce engines.

Many airlines around the world are struggling to cope with lower demand at a time of economic uncertainty, high fuel costs and ever increased competition and consolidation of companies continue.

Last week Walsh announced his new IAG was forging a deal to buy loss-making bmi – formerly British Midlands – from Lufthansa of Germany. He rejected concerns the deal could produce an increase in fares, promising to use bmi's takeoff and landing slots at London's Heathrow as bridgeheads to cities in China, Korea, and Vietnam. The planned tie-up has alarmed rival Virgin Atlantic.



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