‘Aviation’s hard man’: Qantas boss strapped in for the long haul

Normal text sizeLarger text sizeVery large text size

Geoff Dixon, who was the chief executive of Qantas for seven years, used to joke that he never stood on the street with any of his three potential successors behind him, less they push him in front of a bus. In contrast, Alan Joyce, the pint-sized Irish mathematician with a thick brogue, who succeeded Dixon and built a reputation as aviation’s hard man, has never had to watch his back.

Joyce has been Qantas’s chief executive for almost 14 years. He is one of the longest-serving CEOs of an ASX company and one of Australia’s most influential leaders. During his tenure at Qantas, half a dozen potential successors have departed and more may follow, as Qantas’s board has signalled that Joyce could be there for some years to come.

In March, Qantas chairman Richard Goyder told staff, senior management and shareholders that his star CEO’s contract was open-ended. “Alan will remain as CEO until at least the end of 2023, and possibly beyond. He’s done an incredible job through the pandemic and now into the rebuild, and he’s about as energised in the role as I’ve ever seen him given what’s on the horizon.”

While the news was welcomed by shareholders it wasn’t received as positively by unions, some staff members and customers.

It is possible that Joyce, 55, will stay on as CEO to oversee the delivery of Project Sunrise, which promises to deliver the first non-stop flights from Australia’s east coast to New York and London by the end of 2025. The project has been a passion of Joyce’s, and if he does stay until those first non-stop flights, then he will have been at the helm of Qantas for 17 years.

While Joyce has won plaudits from the Qantas board and shareholders for his streamlined management of the airline, which has been defined by a focus on cost-cutting and earnings growth, and a breathtaking ruthlessness, there have also been critics whose voices have grown louder around declining customer service levels and low employee morale.

Before the pandemic, a gulf already existed between senior management, employees, and customers, which has only widened. It wasn’t helped in April when Joyce blamed customers for contributing to the travel chaos at airports during the Easter holiday period when there were long queues and delays, and passengers missed flights. “Our customers are not match fit,” he said.

Those remarks drew a hostile response from customers, which was compounded further by a backlash across social media about the airline’s poor customer service. Customers vented their frustration at the failure to get through to Qantas’s call centres, with reports by some that they were on hold for up to seven hours, and others complaining of cancelled flights, long delays and missing luggage.

Qantas, which last month announced two acquisitions, a 51 per cent investment in TripADeal, for an undisclosed sum, and also the buyout of Alliance Aviation Services for $610.8 million, attributed its customer service problems to labour shortages.

Labour shortages have affected airlines globally as a strong rebound in travel stretches an industry still fragile from the pandemic, during which many workers were laid off.

“They take their customers for granted.”

Peter Morgan, veteran fund manager

Qantas hasn’t announced what it is spending to recruit additional staff, although an airline spokesman said the company intended to have 1500 staff in its call centres in the next few months, which is double what it had pre-COVID. The move it hopes will drastically reduce wait times at its call centres, which are spread across Hobart, Auckland, Cape Town, Fiji and the Philippines.

Since 2010, the number of Qantas employees has declined from 37,500 to 22,000, which includes 9400 leaving during the past two years.

“All through COVID, Qantas got massive help from the government with packages and subsidies to get them through, and to not be prepared when they come out the other side is just not right,” says veteran fund manager Peter Morgan, who now manages his own money. “It is arrogant. They take their customers for granted.”

In the past two years, Qantas was estimated to have received close to $2 billion in government support through JobKeeper and other aviation-specific programs. The entire industry, including airports, was estimated to have received $5 billion of government backing during that period.

“It’s a $10 billion company that was bailed out by the government, and why the government didn’t get equity in the business after they pumped so much taxpayer money into it, is beyond me,” says Morgan. “Every time you bail something out like that, a company gets more arrogant.”

Qantas, which says it lost between $15 billion to $20 billion in revenue during the pandemic, has seen its dominance in the domestic market grow over the past two years. It now commands 70 per cent of the domestic market, when it was hovering between 60 and 65 per cent before COVID-19.

Queues at Sydney Airport during the Easter holiday chaos. Credit:Oscar Colman

Qantas’ domestic fleet, which includes Jetstar, is operating at 100 per cent capacity, although it has cut its number of flights because of higher fuel costs, which have been driven up by the war in Ukraine. The airline’s international business is flying at under 50 per cent of its capacity as some overseas markets such as Hong Kong, China and Japan have not fully opened up.

Investment bank Credit Suisse has an underperform rating on the airline, citing concerns about higher fuel costs and increased competition from Virgin and Rex, with a share price target on the company for the next year of $5.05. UBS has forecast that Qantas will return to profitability in 2023, on an earnings before interest and tax basis, and instead has a bullish share price target of $6.75. Its positive outlook is based on the recovery in the domestic aviation market, a reset of the international business and cost savings. Qantas shares were recently trading at $5.21.

In business circles, Joyce is admired for how he has tamed the unions through strong-arm tactics over the past decade and a half. Many still talk about his stunning decision to ground the entire Qantas fleet in a fight with unions in 2011. The grounding of the fleet left 100,000 passengers stranded globally. At the time, Joyce was recuperating from his own battle with prostate cancer.

Joyce has usually taken on the unions and won. But in his latest clash with the Transport Workers Union – over the outsourcing of 2000 baggage handler jobs that the airline says would save $100 million – he has blotted his copybook. Qantas lost its case in the Federal Court and has been directed to compensate workers over how it handled that decision. Qantas has sought leave to appeal the ruling in the High Court.

“Alan Joyce is not always popular, but he is probably the best airline executive in the world.”

Peter Harbison, chairman Centre for Aviation

Michael Kaine, the Transport Workers Union’s national secretary, believes staff cuts at Qantas over the past five to six years have led to a decline in customer service and damaged the company’s culture.

“It’s the staff that are and have built the Spirit of Australia. It’s not a tin can. It’s not announcements, which are made about buying $38 billion worth of aircraft into the future so that you can get a tick up in the share price,” says Kaine. “These are all the short-term tactics of a management team that have led to a long-term degradation of culture, and of treatment of workers. And this has now flowed through to reputation and this is what we’re most concerned about. We are looking forward actually to a post-Alan Joyce Qantas, so we have an opportunity to rebuild the Spirit of Australia.”

Joyce and chairman Richard Goyder were invited to comment but Qantas referred this masthead to its public statements.

Loading

While Joyce is unlikely ever to win the admiration of unions he is admired by his peers not only for his financial management, and tough action on industrial relations, but also for his foresight. The non-stop flights to New York and London are ambitious. They would be the world’s longest non-stop commercial flights, but they also require a substantial capital investment in new aircraft, an amount that Qantas hasn’t disclosed.

“His vision is just outstanding,” says Peter Harbison, chairman of the Centre for Aviation. “Joyce may not always be popular, but he is probably the best airline executive in the world. He’s been pretty ballsy all the way through. He’s never shied away from taking the tough position that he reckons is best for the airline.”

Joyce is also acknowledged for his political savvy. Few chief executives have wielded as much influence in Canberra’s corridors of power, or won as much taxpayer support from successive governments.

“I think over his tenure Alan’s done a very good job in what have been very difficult and challenging years, particularly the last two,” says Anton Tagliaferro, founder of Investors Mutual. “Qantas has to be managed quite aggressively because it is in a very tough industry. There may be some complaints on customer service, but I don’t think there’s any doubt that Alan Joyce should be the guy running Qantas now.”

In Joyce’s time at the top, more than a half dozen executives have departed Qantas, some of whom were considered as candidates to replace him. They include former chief financial officer Simon Hickey, Jetstar boss Bruce Buchanan and Jayne Hrdlicka, who is now chief executive of Virgin Australia. “There’s little doubt that Jayne Hrdlicka was going to be the successor four years ago,” says Harbison. “And then when it became clear that Alan was staying on, she jumped ship. Since she moved out of the picture, the field is wide open.”

Now the possible internal successors to Joyce include chief financial officer Vanessa Hudson, head of loyalty Olivia Wirth and Gareth Evans, the chief executive of Jetstar. Hudson publicly flagged her desire to succeed Joyce earlier this year. Andrew David, head of Qantas domestic and international, who is well-regarded and the most qualified candidate to succeed Joyce, is said by some industry insiders to not want the top job.

In the past, Qantas has hired from within and the board is likely to continue on that path, says Investors Mutual’s Tagliaferro. Of course, that is if those among the senior team are prepared to wait quite a few more years.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.