Australia's largest airline company Qantas was grounding its entire flights and locking out its staff due to pay quarrel with the trade unions, Qantas director Alan Joyce announced on Saturday.

He said all domestic employees involved with the dispute would be locked out as of 8 p.m. local time on Monday, but the flights would be grounded immediately.

"We are locking out until the unions withdraw their extreme claim and reach an agreement with us," Joyce said in a statement.

"It's an unbelievable decision, it's a very hard decision ... we have no alternative," he said, adding this was the fastest way to ensure the airline gets back in the air.