Qantas will not have to reinstate hundreds of outsourced jobs, despite failing in its Federal Court appeal against an earlier judgment that the outsourcing decision was unlawful.

The airline, however, may have to pay compensation to workers and penalties unless it succeeds in a foreshadowed High Court appeal.

The three judges on the Federal Court’s full court on Wednesday backed Justice Michael Lee’s December judgment in dismissing Qantas’ appeal and the Transport Workers Union’s cross-appeal on reinstatement of workers.

Following some redeployments about 1680 workers lost their jobs in 2021 as a result of Qantas’ decision to outsource ground-handling operations at 10 Australian airports, which it claimed would save more than $100 million a year.

“At the time of the outsourcing decision, much of Qantas Airways’ flying activity had dramatically decreased due to the COVID-19 pandemic,” a summary of the full court’s judgment says.

But the timing of the decision effectively eliminated any protected industrial action which was a “workplace right” under the Fair Work Act.

Included in his reasons for not ordering reinstatement of the workers, Justice Lee said Qantas would have to recreate its ground operations, involving large capital expenditure and significant delay, and likely result in future retrenchment.

The full court of Justices Mordy Bromberg, Darryl Rangiah and Robert Bromwich found Justice Lee did not err in refusing reinstatement.

They said he still has to determine the TWU’s claim for compensation for the affected employees and penalties to be imposed on Qantas.

But Qantas said it will be seeking to appeal Wednesday’s judgment 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 airline said in a statement.

It said it would ask the Federal Court to stay the issue of compensation or penalties until after the High Court process.

“The Court’s dismissal of the TWU’s appeal against the decision to not reinstate these former workers shows the TWU has been giving its members false hope about getting their previous jobs back, when reinstatement was always unworkable,” the statement said.

The TWU called on the Qantas board to sack CEO Alan Joyce and fellow executive Andrew David after the second court finding that Qantas had broken the law in sacking 2000 workers.

“Through unity, resilience and determination, Qantas workers have achieved a huge victory,” union national secretary Michael Kaine said in a statement.

“This is an emphatic ruling – a unanimous decision from four Federal Court judges. Qantas executives deliberately targeted and attacked workers and broke the law in sacking them to prevent them exercising their rights.”