A new reporting structure at Qantas sees Peter Gregg and John Borghetti emerge as the new successors for Qantas CEO Geoff Dixon.

Qantas CEO Geoff Dixon has made a sweeping revamp of the airline’s senior management, setting up two senior executives to succeed him when he retires at the end of 2006.

Dixon was re-appointed for another two years last year by the board when it became apparent that there was no succession plan in place. The absence of a viable succession plan represented a failure on the part of the Qantas board and chairman, “Dame” Margaret Jackson.

Dixon was to have retired at the end of 2004, but the board was forced to extend his contract by two years, with no additional superannuation, and annual payments and bonuses totalling $6 million.

But within a week of returning from the launch of the Airbus A 380 and then appearing at some aviation seminars in Singapore, Dixon has abandoned the convoluted, McKinsey and Co-inspired a 17 person reporting structure for his senior managers.

This is the old Executive Structure, but from Monday he has desolved the whole lot into basically two people and set them up as contenders to replace him, Chief Financial Officer Peter Gregg and John Borghetti, the executive General Manager of Qantas Airlines.

And of the two, Peter Gregg, an abrasive, driving executive, is better placed because he is one of two executive members of the Qantas board while John Borghetti is not.

But Gregg has limited, if non-existent line and operational management and Qantas insiders say the revamp by Dixon will give his CFO some responsibility in the operational area.

This is being done to try and help him overcome what is perceived as a major weakness.

For example Dixon said in his announcement that, “Fleet and network issues that currently report to Paul Edwards will now report to Peter Gregg and John Borghetti”.

Because of his board position, Gregg is perceived inside Qantas as being superior to Borghetti.

Borghetti, on the other hand, needs some financial skills, but he has got those from running the so-called main airline, which gives him far more operational responsibilities than Gregg has had.

Gregg also gets responsibility for ” fleet and long term network development”, while Borghetti also continues to chair the key operational committee in senior management, the Group Flying Committee which oversees and co-ordinates all the group airlines, Qantas, Qantaslink, Jetstar, Australian Airlines.

Borghetti gets more operational responsibilities under the issue. For example, he gets “responsibility for network management”, possibly the most important day to day position apart from the CEO and CFO. Borghetti will assume control of “schedules and the efficient use of aircraft up to two years”.

That means all the new Boeings Airbuses and the smaller newer planes at QantasLink (but effectively not Australian Airlines which is using much older Boeing 767s).

One of the more intriguing changes is the effective demotion of Fiona Balfour, the high profile chief information officer of Qantas. She will now report to Gregg, and that makes IT a prime candidate for cost cutting. But Paul Edwards is the big loser from the changes.

Under the old structure he was a direct report and a possible outsider to replace Dixon. Now he has been marginalised and pushed down the pecking order and reports to both Gregg and Borghetti, a demeaning downgrade if ever there was one.

But Edwards will remain and the Qantas overseer of alliances and has a new role of looking after the Qantas investment in other airlines, such as Jetstar Asia and Air Pacific.

As a sop, he and Fiona Balfour will remain members of the executive committee, which saw of means all glory, no power.

Other people on the old list, such as Alan Joyce, who runs Jetstar in Australia were not mentioned. That therefore means that he along with the other dozen or so executives not mentioned, are effectively out of the running for the top job, unless they can convince the board otherwise.

Here is the memo issued by Dixon to staff on Monday:

I have decided to make changes to the Qantas management structure to better able the company to meet the ever-changing needs of the aviation industry and, in particular, the competitive pressures.

Fleet and network issues that currently report to Paul Edwards will now report to Peter Gregg, Chief Financial Officer, and John Borghetti, Executive General Manager Qantas Airlines.

Peter’s area, through Simon Hickey, Head of Strategy, will now take responsibility for fleet and long term network development. This will provide better co-ordination of our vital long-term fleet and network strategies.

John Borghetti, through Damien Wallace, Head of Network Scheduling, will assume responsibility for network management, including decisions concerning schedules and the efficient use of the aircraft up to two years from day of operation. John will also continue to Chair the Group Flying Committee that co-ordinates group (ie, Qantas, QantasLink, Jetstar and Australian Airlines) flying patterns.

Paul Edwards, Executive General Manager Alliances, will maintain responsibility for long term alliance relationships, while also taking on a new role for overseeing Qantas investments in other airlines. Paul will sit on the Boards of key investments such as Jetstar Asia and Air Pacific. John Kerr, Head of Strategic Alliances, and Peter McCumstie, Head of Investment Airline Performance, will continue to report to Paul.

We also have a need to introduce further efficiencies across the group’s corporate activities. To help achieve this and to provide tighter integration of key processes between financial services and Qantas Business Services (QBS) I have decided that the Executive General Manager Business Services and Chief Information Officer, Fiona Balfour, will now report to Peter Gregg.

This move will enable a more effective linkage between IT and strategy initiatives such as the Sustainable Future program.”Paul and Fiona will continue to be members of the Executive Committee. John, Peter and Paul will issue new organisational charts within the next week.

Geoff Dixon

Peter Fray

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