Qantas Airways was not out of line on its existing arrangements with Jetconnect pilots employed by its New Zealand subsidiary, according to a decision reached late Tuesday by Fair Work Australia.

"In our view, the operating agreements between Qantas and Jetconnect and the employment contracts entered into between Jetconnect and its pilots cannot be held to be shams," the industrial arbitrator said on its ruling and as reported by The Australian.

In the ruling, majority of Fair Work commissioners deemed the compensation set up between Qantas and Jetconnect as perfectly legal, which the agency noted was sealed without any known violations collective New Zealand industrial agreement.

Furthermore, the commissioners argued that what Qantas and Jetconnect had actually achieved was a legitimate commercial arrangement to push down costs of trans-Tasman, which benefitted not only the industry but passengers as well.

"Even though Qantas exercises a considerable degree and control and influence over the operation of its subsidiary, this is not sufficient to disregard the separate legal personality of the subsidiary," the Fair Work ruling said.

Earlier, leaders of the Australian and International Pilots Association (AIPA) petitioned Fair Work to declare as illegal the Qantas-Jetconnect scheme, which the union characterise as nothing but a sham that only allows Qantas use cheaper labor not available in Australia.

"Qantas management have been cynically using this hollow shell of a company to avoid awarding employees Australian wages and conditions on what are ostensibly Qantas flights," AIPA president Captain Barry Jackson was quoted by BusinessDay.

However, Fair Work is under the impression that Qantas is simply enforcing a legitimate labour agreement as the industrial watchdog advised AIPA that it has no legal rights to represent the interest of aviators working for Jetconnect, currently based in New Zealand.

In a statement, Qantas spokeswoman Olivia Wirth praised the development and called on AIPA to honour Fair Work's decision and refrain from any further industrial actions.

"The union should not be attempting to use Australia's Fair Work Act to override the industrial relations legislation and industrial agreements in other countries," Wirth told BusinessDay.

"The decision by Fair Work Australia is a comprehensive dismissal of the pilots' union's claim that the establishment of Jetconnect was to avoid Australia's industrial laws or disadvantage Qantas pilots," she added.