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Nov 4, 2011

Alan Joyce faces fire in Senate grilling

Qantas CEO Alan Joyce faces a huge task to rebuild his credibility after a morning of intense questioning before a Senate inquiry.

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Qantas CEO Alan Joyce faces a huge task to rebuild his credibility after a morning of intense questioning before the Senate inquiry into the Qantas (Still Call Australia Home) Bill sponsored by Green leader senator Bob Brown and independent Senator Nick Xenophon.

Several hours into the hearing Senator Doug Cameron clashed with Joyce saying he was “trying to get an idea of the thinking behind this crazy idea of Qantas to ground the airline . You’re like Richard Nixon trying to talk your way out of everything.”

Joyce responded “You’re a bit like a McCarthy trial at the moment …”

The senators were unaware of the drama going on aboard QF31, a Qantas A380 flying from Singapore to London, which has made an emergency landing in Dubai after an engine failure.

The incident comes on the first anniversary of the incident in which the A380 operating QF32 suffered a catastrophic engine failure after departing Singapore for Sydney. It is still on the ground at Singapore airport undergoing a massive reconstruction.

Joyce may have been handed an alert about the incident just before his extended appearance before the Senate inquiry ended. It was hard to discern on the live streaming broadcast of proceedings.

In the session Cameron accused Joyce of deliberately destroying the Australian economy to try and get his way, and Joyce responded very clearly that the actions he took entirely on his own using his operational discretion were absolutely essential to save Qantas from a death by a thousand cuts and that he was justified in enlarging the dispute by shutting down the airline to force a show down in Fair Work Australia leading to the shutting down of lawful industrial action by its pilots, licensed engineers and ground staff.

The chairman of the Senate Committee Senator Glenn Serle said there were a huge number of questions arising from Joyce’s testimony and Cameron said he was going to study the Hansard very carefully to frame those that would be pursued when a return session with the Qantas CEO was scheduled.

During the session Senator Brown accessed Joyce of deliberately misleading parliamentarians in the weeks before the grounding as to its premeditated plan to lock out staff and passengers.

In the opening stages of today’s inquiry into Still Call Australia Home amendments to the Qantas Sale Act of 1992 Joyce said the Qantas group would have to be split up and Jetstar and its Asia interests sold if the legislation is amended as proposed. However he told the chairman, Senator Glenn Sterle, that Qantas  is not considering or planning to break up the airline group and sell off some assets and it has not been discussed at board level.

The amendments would stop Qantas using subsidiary investments to transfer assets offshore to some extent, and would outlaw the rotation of Asia based flight crews through domestic services.

Grilled by Serle about the illegality of Qantas continuing to sell tickets after it had decided to ground the fleet, Joyce briefly laughed and said it was a mistake but was pulled up by Serle who said “it was not a little mistake”.

Serle expressed incredulity that Qantas did not discover its mistake in continuing to illegally sell tickets after its decision to ground the fleet until 8.30pm, three-and-a-half hours after the grounding that left it with no real product to sell (contrary to law).

Joyce also insisted that Qantas did not book any more rooms than usual in hotels around the world in the four days before the snap grounding decision than normal, and disputed that letters to 30,000 Qantas staff concerning the shutdown had been printed or couriers booked, days in advance.

He then said the formal notifications after the 10.30am board endorsement of his grounding decision last Saturday were not printed until 11.30am for distribution not before 5pm and that the couriers were not booked until well after the shut down.

Serle asked if it was normal for Qantas to book several thousand hotel rooms in advance for a Saturday night in Singapore or Los Angeles, and Joyce indicated that it was. He undertook to provide written proof as to when the Qantas hotel rooms were booked in both ports, when the notifications were printed and when the couriers were engaged.

Serle told Joyce he had the most honest face at the table, but he had to satisfy other senators.

In answer to questions from Xenophon, Joyce confirmed he made the grounding decision alone using his unlimited delegated authority in operational matters. He had referred it to the board because of its implications  for the brand and for their endorsement.

Joyce told the inquiry that Qantas might not have survived a year because of the rate at which forward bookings were collapsing. He said that in October actual sales of higher yielding business fares were down by 40% on the prime east coast route, off by 14% on Perth routes and down by 7% on Canberra routes.

In a late development the committee will go in camera shortly to see emails to Qantas employees confirming that management had planned the grounding more than a week before Joyce claims to have woken up and taken a spontaneous decision.

*There will further coverage on Crikey blog Plane Talking

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

Ben Sandilands has reported and analysed the mechanical mobility of humanity since late 1960 - the end of the age of great scheduled ocean liners and coastal steamers and the start of the jet age. He’s worked in newspapers, radio and TV in a wide range of roles as a journalist at home and abroad for 56 years, the last 18 freelance.

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57 thoughts on “Alan Joyce faces fire in Senate grilling

  1. Bill Williams

    Ben,
    Qantas’ Queeg and the Peter Principle: the cost of flawed CEO recruitment
    Irrespective of the rights and wrongs of Qantas CEO, Alan Joyce’s decision to ground the airline’s aircraft, the question has to be asked: how did the situation get to that point? Are the unions really the problem as Joyce asserts or has his own leadership style produced a counter-dependent response…….a modern day, Captain Queeg-like “Caine mutiny”, that suddenly requires intervention by a higher authority (if we believe Julia Gillard and Tony Abbott)?
    A strong argument can be made that the board of Qantas is responsible for the state of the airline today. Alan Joyce was appointed to the role of CEO of Qantas less than 5 months after his 42nd birthday. Many executive recruitment experts would advise that at 42 (when he was appointed to the Qantas CEO role, Alan Joyce just could not have had enough experience of strategic management to do the job well. Some methodologies would suggest he would need to be at leas 50 before he could be expected to make effective decisions for an organisation as large and complex as Qantas. In fact, it could be argued that Alan Joyce’s Queeg- like behaviour (see Herman Wouk’s “The Caine Mutiny”) is a predictable outcome of putting someone in a job requiring decisionmaking above their capability level.
    In terms more familiar to most people, Alan Joyce is a perfect illustration of the Peter Principle: he has been promoted to his level of incompetence.
    It could be argued that the Qantas board should have taken more notice of Alan Joyce’s previous work performance. Joyce was in charge of Revenue Management and Fleet Planning at Ansett until the year before Ansett went into receivership. Certainly the warning signs about Joyce’s leadership have been clearly visible since he took the job. For a while Joyce could be forgiven for many of the problems he face because he was required to respond to the consequences of decisions that (it could be argued) were made before he was CEO. These decisions have required Joyce to respond to a range of issues that have included customer service, aircraft maintenance, aircraft selection, industrial relations, international relations & fuel price hedging . Crikey’s own contributor Ben Sandilands has documented many of them on his Crikey blog “Plane Talking”.
    It may also be that Alan Joyce will never attain the judgement making ability required to lead a 35,000 staff multinational operation organisation. It could be argued that the very fact that Alan Joyce finds enough time to read your “Plane Talking” Crikey blogs and write letters denying Sandiland’s assertions (see:
    http://blogs.crikey.com.au/planetalking/2011/06/09/letter-from-qantas-ceo-alan-joyce/) is evidence that Alan Joyce might be a classic “Narcissistic Leader”*….more concerned about his own image in the Crikey “mirror” than the health of Qantas. (*see Wikipedia’s definition of corporate narcissism @ http://en.wikipedia.org/wiki/Narcissistic_leadership as well as Sam Vaknin’s somewhat darker definition @ http://www.globalpolitician.com/print.asp?id=558).
    [A couple of extracts from Sam Vaknin’s essay:
    “The malignant narcissist invents and then projects a false, fictitious, self for the world to fear, or to admire. He maintains a tenuous grasp on reality to start with and this is further exacerbated by the trappings of power. The narcissist’s grandiose self-delusions and fantasies of omnipotence and omniscience are supported by real life authority and the narcissist’s predilection to surround himself with obsequious sycophants.”

    Narcissistic leadership often poses as a rebellion against the “old ways” – against the hegemonic culture, the upper classes, the established religions, the superpowers, the corrupt order. Narcissistic movements are puerile, a reaction to narcissistic injuries inflicted upon a narcissistic (and rather psychopathic) toddler nation-state, or group, or upon the leader.”]
    Those who support and admire Alan Joyce’s bold grounding of aircraft while CHOGM was being held and on the weekend of the Melbourne Cup might see Joyce’s timing as excellent. Those that view him as a dysfunctional narcissist would recognise that the bigger the audience and the more dramatic the “stage”, the more he probably enjoyed it. The damage to Qantas is a price he is happy to pay for his fame. Seeking fame is also a hallmark of the narcissistic leader. How many previous Qantas CEO’s can the average Australian name? Most would be hard pressed to name even one.
    To even begin to resolve its problems the board of Qantas has to replace Alan Joyce as soon as possible, with a successor with extensive large multinational experience in helping a “stalled” organisation to recover “flying speed”. It will need someone like Jac Nasser. [A case study for Qantas to compare itself to might be Telstra’s experience with Sol Trujillo or Labor’s experience with Kevin Rudd.]

    When the Qantas board has found Joyce’s successor they will also need to realise that many of the problems the new CEO will face in the next 10 years will have resulted from decisions made under Joyce’s watch. Ultimately, Qantas shareholders should hold the Qantas board accountable for its decision to recruit Alan Joyce in the first place.

    How can Joyce hope to win the hearts and minds of Qantas pilots and engineers at this point? If a Qantas employee sabotages a Qantas jet and causes an accident whose fault would it be? Where was Joyce’s concern for all of the passengers and businesses that were mere “collateral damage” to the great Qantas general with the grand plan and sense of drama?

    The Senate is right to grill Joyce….and Qantas shareholders will be right when they change the sycophantic Qantas board.

  2. Karen

    @ Gee Wizz – I’m not wrong – read my sentence carefully – Qantas belonged to the government once and then was sold under the Qantas Sale Act. I’m sure you would agree that is what I said, on reflection.

    As for Labor’s so-called legacy of debt, that’s bull shit (I am sick of that lie) – this was a stupid claim based on forward estimates that were never realised because by the time Keating left office, Australia was already strongly pulling out of recession – and Howard took the benefit of it. And as for Costello, he just lay in a hammock for the next 11 years (Keatings words) thanks to the powerful economic reforms introduced by Keating.

    Howard’s reasons for selling Qantas were ideological, pure and simple.

    As for the unions, this is precisely what the fight is about – quality, appropriate wages (worker are already prepared to accept only 2.5% wage increase, which is effectively a wage cut, given the inflation rate), but more importantly job security. The airline has been run into the ground simply because Joyce wants to set up a low cost, nasty little Asian carrier in Singapore or KL that keeps breaking down, and cynically market it back to us as an Australian brand. Apart from anything else, that man shouldn’t lie to us.

    Borghetti at least treats the unions, his staff and the travelling public appropriately. With Virgin, you don’t get constant break downs, you don’t get cancellations at the last minute, which was my experience with Jet Star in 2009 (never again). And after being stranded on QF 5 flying to Singapore to Sydney in late August, I will never fly with that hopeless airline again. As much as I want to support the unions in this.

  3. michael r james

    [No it was a private company…. It never started off as a public company.]

    Like most early airline services, Qantas was largely dependent on government contracts for survival, mostly for postal delivery but also Flying Doctor Service. United Airlines (started by Boeing Aircraft Co.) began the same way, and their delivery service also eventually became a stand-alone company, UPS (not to be confused with US Postal Service).

    The first sale of shares in the privatization of Qantas happened in 1993 with the sale of a 25% tranche to British Airways. Then there was a long pause with further tranches in subsequent years. The final tranches were in fact sold by the Howard government resulting in 45% foreign ownership but luckily retaining the requirement of “51% Australian owned”.

    And if 50 years of government ownership doesn’t mean something then I don’t know what does. It was built up during the post-war period to be one of the world’s great and innovative airlines. I have never seen any evidence that, other than the initial purchase, it ever cost the government anything. And it certainly was a great flag bearer for the nation and tourism and diplomacy for those 50 years. I suspect it repaid the purchase price one hundred fold, either directly or indirectly via all the economic and immeasurable goodwill it generated around the world. But note, it may have been government owned but it was run at arms length with operational independence, just like Singapore Airlines is run today even though the Singapore government owns a Golden Share, which you can be damned sure they will never be so short-sighted to sell off, or lose control–even though just the existence of the Golden Share may be enough to make sure untoward commercial nuttiness does not happen. Alas, no such safeguard for us.

  4. michael r james

    [@DRSMITHY Posted Saturday, 5 November 2011 at 6:42 pm | Permalink
    That’s because rebuilding society after the carnage wrought by a Liberal Government is an expensive business.]

    I usually think of it as 12 years of nearly complete neglect of infrastructure. This is what happens when you leave it to the market! Or even worse PPPs that manage to transfer most risk to the public, all profit to private interests and use the most expensive method to fund/build infrastructure. And extraordinarily selective kinds of infrastructure such as expensive roads but neglected public transport and neglected freight transport in this, one of the largest countries in the world. Hence no solution to the city congestion problem (congestion costs estimated to be $20 to $30 billion pa soon, of course of no concern to the companies that build roads.).

    There is obviously a limit to what a government can do in one term. If we get a Tony Abbott government one wonders how many years/decades it will set us back?

    Marilyn is right, especially if government borrowings are used on infrastructure or other kinds of nation building (ie. not for consumption). This is because governments, especially ones with top reputations like Australia, borrow at interest rates at least half of what commercial organizations can. It can certainly be argued that allowing capital-intensive basic public infrastructure (bridges, roads, public transport, basic utilities, educational & health infrastructure etc) to be built by/funded by commercial interests is a grotesque error if not criminal. (Note for those feeble minded: obviously all infrastructure is actually physically constructed by the private sector. Here we are talking about its financing, and to a large degree its planning/specification. This is the way it is done in some of the leading “free market” capitalist countries like the USA, HK, Singapore etc.)

  5. michael r james

    @PETEYBOY Posted Sunday, 6 November 2011 at 10:21 pm

    Perhaps I should have avoided the rebuke, but on the other hand it has (finally) produced some evidence from you.

    But I remain unconvinced. You may not believe it but you are in fact cherry picking the data and it really proves nothing. No, I am not being obtuse or in denial. I always knew there was a high likelihood that Qantas had received government funds at different times. Of course. I don’t even know how an organization like that financed purchase of expensive aircraft etc. (Governments are liable to undercapitalize such organizations and/or place strict limits on their borrowing from commercial sources etc. Yes, to pre-empt you, a reason to privatize it but while retaining a Golden Share so as to control the things really important to the national interest. More below.)

    So the thing is, you would need to do a proper accounting over the lifetime of government ownership. For example you talk about the cash injections but then ignore the cash return from the privatization (over a period of about 5 years).

    On the other side of the ledger is the fact that Qantas served this country very well, probably in a way which is impossible to monetize; and yes, obviously one reason why nations retain government owned airlines. If you do not accept Singapore as a good example what would you accept? Do you think the accounts for SIA would be positive or negative over its 40+ year history? And more importantly, within limits, do you think the Singapore government puts that at the top of its list of priorities? Do you think the Singapore people would? (And if it is valid for tiny little Singapore, a brand new nation in 1964, to carefully nurture its airline, how could it not be for Australia –being at the end of the line, with routes to nowhere else, and the most distant country in the world from anywhere else?

    But you also need to compare government ownership with private ownership. Qantas shares have dropped from a high of $5 (actually it briefly hit $6) to the price most of this year–let’s use $1.61–which is a drop of $3.39. With 2.265 b shares that is $7.7 billion of shareholders cash it has burned, 51% of which is Australian (mostly institutional so, no, I do not greatly distinguish between public v private.) And what about the quarter billion it cost the Australian economy thru that wildcat shutdown? And quite possible much more through damage to Brand Australia over the coming years.

    Again, why do you think Singapore keeps a Golden Share in SIA? And with retention of shares after privatization the government can recoup some of its “losses” via dividends. We managed to get the worst of all possible worlds, and to doubly inflict self-harm we privatized our airports into a dangerous monopoly (so Qantas gets hit with the highest landing fees in the world–and its customers with the highest parking and transport fees in the world–at its home base, while Singapore, Emirates etc have their homebase/hub also government owned and controlling this strategically important element to make sure it all works for the nation. (Do you think there might be some reason why the US retains ownership of all their big airports?)

    You finish: “Qantas was on a highway to extinction when in government hands, and you can guarantee no government is going back there.”

    Funny, because Qantas is clearly on a highway to extinction right now in the hands of the private sector. They would either completely offshore it, hand over a lot of its assets (planes, landing slots) to the trashy low-cost brands it is trying to create (we’ll see how well they compete with the Asians over the medium or long-term), or of course the medium-term plan for the likes of Joyce, Leigh and Dixon: cash out in a sale to PE. Every financial commentator I have read from the failed PE takeover in 2008 says it would have assuredly lead to the complete collapse of the airline. Yet it is clear it remains in the hearts of the board, even if it is against the shareholders interests and assuredly against the national interest.

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