Hugo Kelly attending the Qantas AGM on Thursday and has filed this excellent report pulling together the industrial, ethical, political and corporate elements of what is one big story at the moment.

The cash for comment inquiry certainly hasn’t stopped our national airline. And when the contra’s from Qantas, it means free first class flights, not crisp folding bills, are the new currency for the Sydney sleaze jocks John Laws and Alan “The Parrot” Jones. This we learned during one helluva day in the life of the Flying Kangaroo.

Qantas CEO Geoff Dixon is an old journo, and boy does he know how to whip up a good yarn. Last Thursday, Dixon had pumped out so much news, there hardly seemed room for more by the time 2pm rolled around, and shareholders gathered at the Melbourne Concert Hall for the airline’s 81st AGM.

That very morning, the airline had asked the ASX to freeze its shares pending an announcement. What was it to be?

The morning papers were reporting broker-fuelled speculation British Airways was looking to offload its 25% shareholding.

The papers reported the company was poised to impose an 18 month pay freeze on staff. This on the day Bloomberg’s World Airline Index reported Qantas was the only stock among 30 global airlines to gain during the past six months – by 24%, thank you very much.

Dixon solved the mystery by announcing at a 10am media conference a $300 million capital raising to help fund the $1.5 billion purchase of 17 new aircraft – 15 narrowbodies, either 737s, or A320s, and two smaller Dash 8s, for regional routes.

Qantas became the only airline in the world outside China to buy big passenger aircraft after September 11. The big ticket purchase signalled Dixon’s intention to crush the domestic opposition, and reconfigure its international routes, many badly affected by the terrorism/economic trauma.

The timing for the bulk purchase is perfect: Boeing and Airbus Industrie will roll over and offer deep discounts to secure the order.

Armed with this information, we braved the tiny banner-waving union crowd outside the concert hall, and the line of bouncers inspecting bags inside.

Inside, Chairman Margaret Jackson welcomed shareholders to the new world of aviation – a global airline catastrophe. Where terror and economic gloom have thrown 100,000 airline employees out of work and the average international airline stock prices are 34% down over the past six months. Said she: “No airline in the world can be immune to these pressures. We have to confront the prospect that our passengers will never feel the same about airline travel.”

And while many things are changing at Qantas, they’re still clinging to some old, smelly, relationships. What we discovered over the course of the next three hours included:

* Qantas has stopped paying Jones & Laws cash for comment. The new deal is they get free flights;

* The airline is still considering selling several assets, including its Qantas Flight Catering unit, which has become the near-monopoly airline catering outfit with the demise of Ansett; and a possible float of the Qantas Holidays division has been delayed;

* The airline’s planned budget carrier, Australian Airlines, is set for launch next April;

* Qantas has abandoned its policy of hedging against currency fluctuations, after being stung by a $16 million hedging loss in the year to 2000.

After her intro, Chairwoman Jackson called for questions – and stupidly chose serial AGM pest Jack Tilburn to ask the first one. Not an auspicious start for an accountant whose track record as a member of several big under-performing boards should have disqualified her for the top job at Qantas before she stepped into it last year. But more of that later.

Jumping Jack, a convicted insurance fraudster, set the tone with a rambling ten minute diatribe that drew hoots from the audience and meek obeisance from the Chair. He ranged from the poor quality of the food at the BHP annual meeting, to the number of passengers (32) on his flight down from Sydney, to Dixon’s “inappropriate” membership of the Leighton Holdings board . Oh yeah, and he also wanted the board to stop holding media conferences, as this was apparently responsible for transmitting inside information to the press.

Jackson completely misread the mood, diligently answering each and every branch of Tilburn’s omnibus, bogging down proceedings and only encouraging the nutter, and others of his kind.

AMWU organiser had Dave Oliver rallied the troops with a protest against wage levels outside the meeting. Then it was inside to grill the board. He and a number of union members sought assurances on terms and conditions – none of which were given. Dixon told them to wait until they face management over the negotiating table on Monday morning, when they would find out whether the newspaper stories of an 18-month pay freeze were accurate.

“They’ve been about 10 stories in the papers about Qantas,” said Dixon. “I’d say they’ve got about a 50% strike rate.”

Jackson responded to the wage-freeze issue by telling the unionists that management had already had a pay freeze imposed.

The Shareholders’ Association representative got up on behalf of 71 shareholders and congratulated the board on its 12.5% return on shareholder funds. He expressed disappointment at the decision to raise capital through an institutional book build – a way, he saw it, of dodging the rigours of the prospectus process.

His final concern was that too many directors held too many different board positions – singling out former Public Service chief Mike Codd, who now holds a lazy dozen board posts.

One old timer had a more direct criticism. He liked to see evidence of aviation expertise on the board: “Eyeing up this line-up, I doubt there’s one of them could tell the difference between a Sopwith Camel and a 747.”

Other shareholders were worried about safety. Jackson said the company was working closely with IATA and other relevant authorities to boost on-board security. So no longer will your kids be allowed on to the flight deck to watch touch-down. “The key,” reckoned Jackson, “is to keep the lunatics off our flights in the first place.”

After a series of long, rambling questions, boredom was setting in. Jackson asked someone to nudge an elderly bloke who’d fallen asleep up the front.

Finally called to the microphone, we decided to start off with some banter: “It’s good to hear Qantas is trying to keep lunatics off flights,” we told the Chairman. “Although one might ask how Mr Tilburn managed to slip through the net.”

This raised a few nervous giggles from the audience and the board. Launching off on the wage freeze theme, we noted that board remuneration had increased $300,000 to $7.4 million over the past two months – were board members also subject to a pay freeze, we asked?

Well, said Jackson, the board figures were affected by payments to retiring directors. She assured us the board were also taking their austerity medicine.

After a quickie on hedging, when Jackson replied that the airline was no longer indulging in the costly policy of hedging across international revenues, we came to cash-for-comment.

Why, we wanted to know, was Qantas still paying John Laws between $100,000 and $500,000, and Alan Jones up to $50,000. We went through the history of cash-for-comment, and noted that Jones and Laws were now compelled to reveal their commercial contracts.

According to Jones’ disclosure of interest section on the 2UE Website: “no services are required to be provided under the contract.” Was the chairman aware of any similar contracts where Qantas pays out large sums for no services?, we asked.

Jackson threw to Dixon, who declared that “they do provide services for us. It’s a very open contractual arrangement… in the public domain.” He said: “The problem in the past has been the perception that it had been a confidential or secret arrangement…also we have changed the arrangements, we do pay in kind now. We are not paying cash for comment.”

An interesting revelation, but not altogether convincing. The question drew applause, and at one point, Dixon’s reply drew a clear retort from one audience member: “Why?” he asked. Why, indeed.

The final two matters were the re-election of two board members – Mike Codd and Jackson. Board member Trevor Eastwood took over, and up jumped Jack Tilburn to give his rambling approval of Jackson. We got up, and outlined our concerns:

“At and Crikey Media, we believe the chairman’s overall patchy record as a member of several under-performing boards makes her continued chairmanship problematic.”

This was not what Eastwood wanted us to hear. He looked on grimly as we continued. The audience, too was not ready for our contrary view. Jackson had handled the meeting in an ineffectual, but pleasant manner, and a couple of shareholders got up and commented how lovely it was to see a woman in the big seat. It was also the fag end of the meeting, and folks were shifting in their seats. The smart ones had already left and devoured the desultory offering of cookies and orange juice waiting outside – presumably a dry run for the catering aboard the new discount Australian Airlines.

Nevertheless, we ploughed on:

“She was a member of the Australian Wool Corporation Board that increased prices by 70% over two years, leading to the demise of the Reserve Price Scheme and the Corporation itself – and probably the industry.

“She moved on to the BHP Board, where she became chair of the audit committee during the disastrous period from 1995 to 2000, during which the company wrote off $4 billion of shareholders’ funds. She was also on the audit committee of the Pacific Dunlop board from 1992 to 2000, during which the share price dissolved from over $5 to under $1.

“She resigned last year as chairman of the TAC board, and immediately the new chairman announced a $192 million loss, as investment returns plummeted and claims costs surged.

“We believe the successful growth of Qantas has largely been driven by the previous chairman, James Strong, and a management team led by Geoff Dixon. In difficult times, Qantas requires a strong hand at the controls. That’s why we will be voting against Margaret Jackson to continue as chairman. I’d invite her to address our concerns.”

Eastwood looked bemused. He garbled out a silly analogy about not dumping the star player on the football team if it’s carrying a few passengers, and said Jackson would not be addressing the meeting. Jackson complied, sitting wordlessly in her seat.

A pretty contemptuous way to deal with board appointments. You would have thought a chairman with an ounce of gumption would have stood to defend herself – not just sit supinely by while the worst possible spin on her career is placed firmly on the record.

You have to wonder whether that’s the way she reacts to the many challenges that will face her over the coming turbulent weeks, months and years.

Nevertheless, we were the only shareholders to raise our card against her re-appointment.

This has been an incredible year for Qantas in an incredible year for aviation. Just think of all the silver bullets the airline has dodged. Three months ago Qantas execs were meeting Air New Zealand officials to submit a formal bid to strike a partnership with the Kiwi carrier – with plans to purchase up to a 49 per cent stake in return for Singapore Airlines being permitted to acquire Ansett.

Just imagine the trauma to Qantas if that deal had gone through! Qantas would be stuck with a dog of an Air New Zealand, while facing a newly-capitalised Ansett, backed by the region’s toughest, wealthiest competitor.

Instead, the airline finds itself the unchallenged premium carrier, with Virgin Blue and now Solly-Foxy Air about to embark on a fight to the death for the low-cost airline market.

Prima facie, Qantas’ dominant position is a tick for Chairman Jackson. But her pedestrian performance on Thursday once again reinforced her image as a mild-mannered passenger aboard the Geoff Dixon express.

What’s more, she’s a dissembler, and not a very good one. Asked by unionists at the AGM the accuracy of media reports that Qantas was seeking a staff wage freeze, she waffled out the old chestnuts: “Don’t believe what you read in the papers.”

Four hours earlier, she sat beside Dixon at the press conference where he was asked the same question. His response: “We have a wage freeze on for our executives, and yes I would like to see a wage freeze if it was possible.”

Here’s what Dixon told the media: “I have no desire, Margaret has no desire, the board of Qantas has no desire to put Ansett out of business in any way, shape or form.” That, of course, would just be an added bonus. Said he: “We’re not seeking any more than 65 to 70% of the market. I think we have the right to try and get that under the current circumstances.”

With insurance premiums up 1000%, security cost rising, international load factors drying up overseas, unions are under the pump.

Dixon, a sentimental softie from way back, has named his new low-cost outfit, Australian Airlines. And why not? This was the name of the former government-owned domestic airline that gave Dixon his power base during the 80s and 90s, when he was a marketing operative and sidekick to the then AA managing director James Strong. When AA merged with Qantas, the under-performing and self-satisfied Qantas management didn’t see them coming.

Dixon and Strong boarded the Flying Kangaroo with cutlasses waving, and overwhelmed the sleepy flight crew, quickly gaining control of the national icon.

Australian Airlines – a single class airline with none of the trimmings like frequent flyer programs or club lounges – will fly sectors from which Qantas has withdrawn, including China, Korea, Malaysia, Greece, Canada, Tahiti and parts of Japan.

It will be staffed by workers from a labour hire company in a similar arrangement to the Impulse model. Qantas has lost $30 million in two years flying to Beijing and Shanghai – even with 90% load factors.

In a speech a few months ago, Dixon said: “We are not doing it to attack the conditions of our present employees,”. Yeah, but that’s just an added bonus – as unions will discover on Monday.

It’s a vital time for unions, but not all seem to be focused on the main game. Dixon has focused on flight attendants as one area ripe for foreign labour. Over the past couple of years months, Qantas has started to base some of its 5,000 cabin crew in New Zealand and Bangkok – employed by a labour hire firm with inferior conditions than union members.

This all seriously threatens the union’s power base – not to mention their members’ conditions. But some flight attendants seem pre-occupied with a campaign to get their union’s former federal secretary, Shayne Nealon, who defected to Qantas management six years ago after 20 years with the union.

During Thursday’s AGM, a union operative slipped me an anonymous poison pen letter to Jackson outlining a range of accusations against Nealon including nepotism and other related, more serious allegations.

The rumour-mongers got a willing dupe in our old mate, Jumping Jack Tilburn, who raised the issue in one of his rambling diatribes, mercifully without naming names.

Back in the air, passengers are getting jumpy, and panic is seeping through the system. Like the “Dust on the Danish” scare in Brisbane this week where a fully-laden Qantas jet was prevented from take-off when a woman suffered an apparent heart attack after mistaking the light dusting of sugar on her in-flight pastry for anthrax.

Qantas has subsequently asked the soon-to-be sold catering division to avoid dishing up anything remotely resembling white powder. Let’s hope Chairman Jackson keeps clear from that white powder, too.


DISCLOSURE: Hugo Kelly was a transport roundsman in the roaring 80s, when airline freebies were flying around faster than a terrorist on a 757. His most fondly remembered freebie was a return business class flight to Europe on Lufthansa to cover the 1989 Paris Air Show, which for a reporter whose stock in trade was covering the trams & trains, was an absolute pearler. A couple of Russian pilots accidently turned the trip into a real news story when they crashed their MiG fighter jets into each other, just in front of the Airbus Industrie marquee where the hacks were enjoying gorgonzola and pate-filled croissants, washed down with 1982 Verve non-vintage. Fortunately no bubbly was spilled, and we were just in time to file our eyewitness account for the front page. The Ruskies parachuted out with a few cuts and bruises. Now, subscribers, we ask you to believe that all this outrageous freebie action – disclosed, as it was, at the time – influenced in absolutely no way our reporting of the industry. Truly.