Check out three separate missives the Qantas result and spin from our aviation correspondent Pemberton Strong.

As raves go, she could have been far more dramatic. Bodice
ripping always attracts attention, as does dummy spitting. But somehow
I don’t think that’s the image Qantas chair, ‘Dame’ Margaret Jackson
wants to portray. She’s a well-bred Melbourne gal!

But her
rave at Thursday’s press conference announcing the record profit and
rehiring of CEO, Geoff Dixon, left people wondering why? We’ve heard it
all before? What’s Qantas, the ‘Dame’ and GOD (Geoff Dixon as Qantas
employees refer to him) up to.

But was the point of her comments? Read them in full here.

Qantas
doesn’t really need protection and can’t get it anyway. The airline
can’t seriously expect any sympathy, even from the Howard mob or its
Minister for Qantas, sorry, Minister for Transport, John Anderson.

And
yet she had the hide to say this “One of the key areas of concern
relates to government ownership, support and intervention”.

So
here’s she and the airline complaining about the inequality of
competition and playing fields and the like and subtly asking for some
sort of government appreciation of the problems Qantas now faces. She
can’t really be wanting it, can she? She and the airline can’t really
be asking for Government help when criticising other governments for
assisting their airlines, can she?

Well look how the argument has developed from Qantas.

Her comments were merely the third iteration of a campaign kicked off by Dixon in a letter to The Australian Financial Review last month as we explained here: http://www.crikey.com.au/business/2004/07/20-0003.html.

In
it he started off the whole ‘uneven playing field’ argument including
big nasty governments, unfair government funded airlines from the
Middle East (Emirates and Gulf Air), regulation and the like.

The second step in the argument produced a slightly amazing story in the AFR early this month which Crikey looked at here: http://www.crikey.com.au/business/2004/08/04-0001.html.

Fancy Qantas considering Singapore Airlines, considered the ‘enemy’ a couple of years ago, as the new best pal!

And
then Thursday the Dame’s effort. Turning up at the presser with Dixon,
making her comments and issuing a statement. It was enough to make even
the most comfortable of Qantas travellers wonder, what’s the point?

Well,
deep in the ‘Dame’ statement is the latest possibly last version of the
campaign. The argument was completed, the real story emerged.

Qantas has the corporate begging bowl out and wants something from Caberra.

“In
addition, Qantas remains fettered by a unique limitation – the Qantas
Sale Act,” she said. “This restricts the company’s access to global
equity capital and so increases its cost of capital.

“Qantas
is the only company in Australia to be subject to such legislated
shackles. In light of the substantial challenges facing Qantas, we and
the Government must find a mutually acceptable solution to this issue.”

Changing
this act and its restrictions on foreign ownership of Qantas has been
the big objective of Qantas management and boards since Gary Pemberton
and James Strong took control.

Great phrase, ‘mutally acceptable solution’, so close to that favourite from the Nixon years of ‘mutually assured destruction”!

So
there’s the reality of the argument. ‘All those big nasty foreigners
are supporting their national icons in some way, so what about us?’

Well,
John Howard might have had a sympathetic ear for the “Dame’ who is one
of his favourite gels in business, but Treasuer Peter Costello ( who’s
been sort of invisible lately) is not a fan of changing the Qantas Sale
Act.

That limits all foreign shareholdings to 49 per cent
and no more. It has prevented Qantas from looking to do deals in the
past, or so the argument goes.Getting closer to British Airways,
snaffling Air New Zealand.

Airlines friendly to Qantas were
bagged in the “Dame’s” statement. For example, Air New Zealand was
bailed out by the NZ Government. So much for wanting to join the Kiwis
in the Greater Trans Tasman Qantas Co-Prosperity Sphere.

The proposal to join with Air New Zealand wasn’t mentioned in the official despatches on Thursday.

And
yet the “Dame” and Geoffy went out of their way to worry about big
foreign carriers and the need for Qantas to have the ability to play in
any ongoing consolidation.

Well, why don’t they simply find
a good case and make an announcement and then mount their case for
change. Instead of trying the typical business backdoor shimmy and fix
up the regulatory stucture before slipping a deal in as a fait accompli.

On
a day when Qantas should have been lauded for producing a record result
in very poor conditions in some economies and some markets, this
positive message was overshadowed by the carping, negativity and self
interested special pleading.

The impression of a greedy
corporate was unfortunately left, not an Australian success in
difficult conditions, which was a good story to tell.

Geoff Dixon’sgolden package

What
is it that Geoff Dixon wants. Here he is approaching the end of a very
successful reign as CEO of Qantas, his 65th birthday is in the offing,
and he goes and signs up for another stint piloting the mangy roo
around the world.

Is he going for ‘gold’ as the country’s
oldest CEO (excluding owner CEOs like Rupert Murdoch and Frank Lowy) by
the time his new deal finishes in 2007? Certainly there’s a golden,
medal-winning flow of cash from the company to him.

Perhaps
it’s the sniff of the battle he and the airline have warned is
approaching. Or perhaps it was a meeting of minds with a board short a
logical successor because there isn’t one, and a CEO not wanting to
give up the reins of power just yet?

The board says it
‘invited’ him to re-sign, but airline insiders say the old bloke wanted
to continue in the saddle. Well, it might just be a good call given
that Qantas remains the best performing of the full service airlines
still in business, and without government help.

Although
listening to Geoff again today, and his chairman,’ Dame’ Margaret
Jackson, you’d think the airline was the ‘put upon roo’.

But it remains solidly profitable, which is always the best measurement.

While
Geoff is driven, perhaps there was more than “the smell of aviation
fuel in the morning” to quote his former boss James Strong. More money,
a lot more money would have made it easier to accept the board’s kind
invitation. A minimum of $2 million a year, plus a bonus that could
reach 60% of that, plus the incentive scheme for senior executives. The
deal runs for three years and that $2 million minium is subject to
review. Check out all the details here.

But
wait, there’s more. As the above statement shows the Qantas CEO will
have racked up a total of $6.7 million in retirement benefits that
would have been payable this December, when his present deal was due to
expire. He will now get that at the end of the new deal, but without
any new retirement benefits being earned over the next three years.

So
there’s more than $9 million in pay and incentives (Qantas says the
bonuses haven’t been paid in two of the last four years, but there’s
still $6 million in basic pay), plus the retirement benefits, and the
shares from the senior executives incentive scheme. All up, Geoff Dixon
could be up for a total of $15 million to $21 million over the next
three years.

With the airline battling staff and their
unions off and on over the past couple of years over pay, conditions
and work practices, news of the Dixon package will surely be like a red
rag to a bull.

But cunning Qantas also announced a $1,000
staff bonus to be paid next week to all current and fixed term staff,
but not to executives in bonus schemes which will be overflowing with
gold, gold gold after this record-beating 88 per cent lift in net
earnings.

That’s just over $35 million in total to non-bonus receiving staff. Generous? Not really.

And
the airline said it would spend $50 million over the next three years
increasing maternity leave benefits, introducing adoption and paternity
leave, starting a stay in touch scheme for women on maternity leave,
building child care centres in Melbourne and Brisbane and doubling
carers’ leave .

Dixon says the airline will push more
heavily in well-being programs and work and family life balance
schemes. All good ideas and about time. But to announce them the same
day as the news of Dixon’s new package was revealed has a cynical touch
to it.

For Geoff Dixon though, staying on beats the joys of retirement!

Qantas loses altitude, or is it attitude


Neil Simon once sang 50 Ways to Leave Your Lover.
And a weepy heart tugger it was. After today’s performance by Qantas
and its shares, the follow up hit could be “how many reasons do you
need to sell Qantas?”

There’s a shopping list of reasons.
Unprofitable, no dividends, higher oil prices, the travelling public
here and overseas are revolting, competition is unfair, so are many of
the rival airlines and governments don’t understand.

Qantas takes the line “trust us we’re an Australian icon, and we are generous to shareholders too”.

Well,
not many of the above apply. Some do, every year. Such as rising or
falling oil prices, fickle public, difficult markets, big nasty
government-funded competitors. Others are a furphy. Like being
unprofitable and not paying dividends. Huh, not in the year just past
with a record profit. Shareholders though have missed out with no
dividend increase or capital management program.

So sorry
Geoff, ‘Dame’ Margaret and the others, but after reading the Qantas
annual profit statement and Marge’s rave about the unevenesss of the
aviation playing field, we’re all confused.

Is that why
the shares tanked around five per cent at one stage after the result
was revealed today to a low of $3.13? They recovered a bit to close 7c
lower for the day at $3.26. That could have been the hedge funds and
other speculators quitting the stock on the news of an 88% rise in net
earnings to a record $648 million. Yep, that puts Qantas on the Crikey
biggest profits list as you can see here: http://www.crikey.com.au/business/2003/11/11-0004.html

Perhaps
it was further warnings about higher oil prices and their impact on
fuel costs and Qantas’ operations. A decision on whether to up the
existing domstic and international surchages could come by the weekend.
That’s a bit naughty isn’t it seeing the need for the first surcharge
isn’t apparent yet! Nothing like preparing for a rainy day.

Or could it have been Michael West’s nice commentary in The Australianthis morning.

So
many reasons, so much to talk about. And yet Qantas find it very hard
to talk about the positives in what is a pretty good result. Board and
management seem to be surprisingly gloomy after breaking all the
records and taking gold.

Margaret takes the ‘Chicken
Little route warning that the sky is about to fall. It’s all the usual
reasons. Markets, government aid, the restrictions on owning Qantas’
shares and an uneven playing field was not level. Check out Jacko’s
full rave here.

And for the full results announcement go here.

Shareholders
will no doubt be left wondering why there’s no increase in the
dividend. At 17c for the year it’s unchanged on the previous year and
is around 50% of net earnings of $648 million. That’s a bit tight, even
though the airline is facing difficult conditions, many of which were
around last year.

International saw a sharp recovery in
earnings thanks to the highly profitable duopolies on the Kangaroo
Route to London from Australia and across the Pacific to the US. They
helped boost international earnings before interest and tax 92% or $192
million to $398.9 million. Not bad.

Domestic business saw
a 141% rise in earnings before interest and tax to just over $539
million.That includes Jetstar and QantasLink . So explain again about
why Jetstar was needed. Total EBIT from all business jumped 92 per cent
to $964.6 million.

No doubt it was helped by the
capricious cancellation of flights. Such as the City Flyer flight
leaving Sydney yesterday morning at 9am and the Thursday at 4pm that
cancelled and turned into a later departure. Load management it’s
called when they consolidate flights with low load factors and poor
yields into higher yielding, more profitable ones. Infuriating
customers it should be labelled.

But it demonstrates how
the domestic business of Qantas is now impervious to Virgin Blue! That
challenge has been repelled with the Qantas domestic business in all
its guises working well, forcing down earnings at the Branson-inspired
interloper.

With Jetstar costing between $80 million and $100 million to set up, shareholders would be now entitled to ask why?

To
combat Virgin Blue, or start a low cost business simply to help control
the unions and drive down costs over time in the existing domestic
operations? Likewise Australian Airlines which is the low-cost
international operator keeping a lid on that division’s labor costs.