Qantas chief Alan Joyce has grounded all Qantas flights immediately and blames ongoing union action for his decision.

In an announcement beamed live across Australia Mr Joyce said unions were "deliberately destabilising our company" and that the airline could not afford the ongoing actions.

Mr Joyce said all Qantas staff involved in strike action would be locked out of the company as of 8:00 p.m. on Sunday.

"We are locking out until the unions withdraw their extreme claim and reach agreement with us," Qantas Mr Joyce told a press conference on Saturday.

Mr Joyce said his hand had been tipped by the impossible demands of the 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 lockout 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.

The airline will offer hotel accommodation and alternative flights to those who are mid-journey and can't get home when the grounding takes effect.

And 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.

Yesterday Mr Joyce warned that half the airline would "be gone" within a year -- with tens of thousands of jobs potentially at risk -- if unions pursued their industrial campaign into 2012.

Mr Joyce, speaking after the airline's annual general meeting yesterday, said parts of the airline would begin to be shut down if the current dispute with engineers, pilots and ground staff was not resolved.

"If action continues ... we will have no choice but to shrink the airline bit by bit," he said.

"If it goes for more than a year, we estimate we will have to shut down half of Qantas operations. That's 50 percent of Qantas, gone. This would have very grave consequences for jobs."

His stark assessment of the financial costs of industrial action now crippling the airline -- estimated to be AU$2 million a day -- has put a cloud over at least 17,000 jobs, or almost half the Qantas workforce.

The airline warned last night that a 48-hour strike by three unions would ground the airline, leaving up to 150,000 passengers stranded.

The escalation of the dispute came as Qantas shareholders gave Mr Joyce's AU$5 million pay packet of their tick of approval.

The Transport Workers Union and the Australian Licensed Aircraft Engineers Association both warned they could undertake 48-hour strikes yesterday, while the Australian and International Pilots Association also has that right.

Mr Joyce told the Herald Sun last night the airline would stand firm despite the unions' threats.

"If these unions walk off the job for two days we would be left with no choice but to ground the airline until they returned to work," he said.

"The unions are holding Qantas and our passengers to ransom."

The airline has already lost AU$68 million as a result of industrial action that has disrupted more than 70,000 passengers, so far.

That bill will hit AU$540 million -- more than the airline's pre-tax profit last financial year -- if the dispute is not resolved by June.

Prime Minister Julia Gillard yesterday stopped short of saying she would intervene under the Fair Work Act powers.

"I believe Australians expect the parties to this dispute to get it resolved and get it fixed," she said.