Qantas has performed superbly over the past three years but is Margaret Jackson really up to the job of chairman given the BHP and PacDun skeletons rattling in her closet.

The meeting was Margaret Jackson’s first day in the big league chairing a major company AGM. She handled things pretty well and the audience was very appreciative given Qantas’s terrific performance largely due to its hedging program. Crikey was the only person to throw up any serious curlies when we asked about cash for comment and Jacko’s lamentable performance at BHP as chair of the audit committee and on the board of Pacific Dunlop.

Jacko threw to CEO-elect Geoff Dixon on cash for comment. For a former journalist, Dicko really should have known better than to say Qantas was getting great value from the deals and that their relationship with the shocking shock jocks was a lot more transparent than some of the other sinners. For the record, there was quite strong applause from the floor when Crikey criticised the cash for comment deals and the board looked like hypocrites having earlier talked about the company’s great ethics and morals. Qantas is the only company which has both Jones and Laws on the payroll with a stack of free flights as well as plenty of cash. It is a disgrace and Crikey will not be flying Qantas again until they dump these appalling shock jocks.

It is easy to look back rather than forward at these sorts of meetings so I threw in a question about succession planning at Qantas. Afterall, Gary Pemberton is arguably Australia’s best performed executive. He did a stellar job at Brambles, then steered Qantas to the stars, has led the NSW TAB with aplomb and has helped create untold riches for Billabong shareholders including about $25 million for himself. Everything he has touched has turned to gold yet now he has been succeeded by an accountant with a couple of big skeletons rattling in her closet.

Jacko tried to turn this around by claiming her times at PacDun and BHP taught her about making the tough calls. Hmmmm, most observers would argue there was a lack of tough calls as BHP wrote off $4 billion over 5 years and PacDun struggled along making bad call after bad call.

Jacko was a partner at accounting firm KPMG when Crikey first met her in 1992 at a conference in Anglesea. With the push gaining momentum for the old boys networks to finally allow some women into the inner sanctum, Melbourne’s ultimate establishment director John Gough decided Jacko was the woman for his board rooms.

First it was Pacific Dunlop which was chaired by Gough at the time. Crikey can remember being at the PacDun AGM in October 1992 when it was announced and PacDun was still a high flyer with a share price north of $5. A few months later Crikey had joined the Kennett spin doctoring machine and the first press release I ever put out was announcing Jacko’s appointment as the new chairman of the TAC after Stockdale and his privatisation guru Michael “Kanga” Roux gave Leon L’Huillier the heave ho.

A few weeks months later she joined the ANZ board which was also chaired by John Gough. And then later in 1993 she joined the BHP board which also had John Gough as a director.

Gough’s reputation is not too flash these days so it is interesting watching Jacko try to surf away from some of the disasters that he oversaw.

And if Jacko quit PacDun and BHP to clear the decks for Qantas why did she then take on a gig next to Gary Pemberton at Billagong as well as a directorship on Ron Walker’s new telco concern Equest? Looks like a case of dumping the dogs and surfing onto new high profile glories.

Jacko pointed out that the new gigs were nowhere near as time-consuming as BHP and PacDun and that Pembo had offered her the Qantas gig with the full support of other directors. She seems to get on well with Pembo because he was the chairman of the selection panel which gave her the job at Qantas.

Jacko may actually do pretty well at Qantas because she has close to the biggest network in corporate Australia. Her uncle is Austrim Nylex chairman Alan Jackson but she is mates with most of the powerbrokers on both sides of politics. Good government connections is vital for any Qantas chairman and Jacko certainly has that. It will be interesting to see how she goes in her first task of getting the 49.9 per cent foreign ownership restriction in the Qantas Sale Act repealed so that the airline can raise some more capital to fund its multi-billion fleet upgrade.

Jacko was quized about her past on Business Sunday the week after the AGM and she repeated the claims about being toughened up by the BHP experience. How can someone see the sunny side of a decision like Magma Copper where BHP appeared to have no risk management whatsoever as it splurged $3 billion on something that was worth close to nothing. What the hell was the chairman of the board’s audit committee doing?

It was supremely ironic to hear chairman Jacko gloating about the Qantas heding program which saved about $250 million off the cost base last year. You see Jacko chairs Victoria’s Transport Accident Commission which has $4 billion invested on behalf of injured Victorian motorists. Unfortunately, the TAC has hedged all the currency exposure in its offshore investment program and therefore has completely missed the benefits of the low Australian dollar . It’s investment return last year was several percentage points below its rivals at the Victorian WorkCover Authority which went into offshore equity and bond markets unhedged and has therefore benefited hugely from the tumbling Aussie dollar. So Jacko is not exactly the hedging star that Qantas would like to make out.

The Qantas fuel hedging program was wise but any airline that did not lock in its fuel purchases when the price hit $US10 a barrel a couple of years back needs to hire a new treasury division. That said, with oil prices now around $US35 a barrel, the Qantas fuel bill is set to rise about $150 million this year which will hurt.

For all the claims of glory on the fuel price hedging, Qantas does not appear to have done so well on managing its currency risk. After much prodding, finance director Peter Gregg admitted they had lost $16 million last year hedging the $4 billion in revenue flows across 88 currencies.

The tone at the Qantas AGM was certainly upbeat. For instance, the Australian Shareholders’ Association representative got up and simply congratulated the board for a great year and then asked about the lack of leg room in economy.

Surely the ASA could raised the small matter of the 30 per cent slump in share price over the past year – albeit from a high base – and also several questions around all the new competition domestically and the rapid-fire succession planning going down at Qantas.

For instance, the meeting was told that CEO James Strong was now leaving in March rather than June next year. With the retirement of Pembo and the recent departure of finance director Gary Toomey to Air New Zealand, the Qantas top echelons are not exactly stable. We weren’t told that former Ansett chairman and current British Airways CEO Rod Eddington would be joining the Qantas board as a BA rep which is good news because Rod is a good man.

The share price plunged about 6 per cent on the day of the meeting but has now clawed its way back to $3.50 which is a jolly good effort given all the challenges the airline is facing.

Let’s hope Jacko proves that BHP and PacDun were aberrations and she can really deliver the goods for one of Australia’s most important companies.

Peter Fray

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