For Qantas CEO Alan Joyce to be running around Capital Hill saying “we could go broke” to politicians is as clear a sign as any of the parlous state of management in Australia’s once iconic carrier.
What does Joyce want? A 50 cent share price? Does he really want to serve the kangaroo up as cheap meat to the much self-touted would-be leveraged equity buyout that Geoff Dixon, John Singleton, Mark Carnegie might yet get up, or any other raid that might structure itself as acceptable under the ownership strictures of the Qantas Sale Act?
This latest effort by Joyce is one of a string of headline-grabbing pronouncements that have variously shocked or damaged the standing of the company, and seen many shareholders make a bolt for the exits. The language used in the lobbying exercise exposed by the Fairfax media this morning is extravagant and appears to be used while oblivious to the interests of shareholders, employees and customers.
But the efforts by Joyce to have politicians roll-back some of the benefits of the national free trade policies supported by the parties to rescue Qantas from its own errors of management need to be kept in the context of recent insights into efforts to cosy up to Etihad Airways’ larger UAE rival carrier Emirates.
For those who have been on Pluto, Etihad, owned by the sovereign interests of Abu Dhabi, is an alliance partner and minority equity owner in Virgin Australia. Virgin Australia is successfully run by John Borghetti, the former Qantas senior executive passed over for Joyce as the successor to Geoff Dixon, who in turn departed after unsuccessfully trying to flog Qantas for a $100 million fee to the Air Partners Australian private equity bid of 2006-2007.
Emirates is owned by the ruling family in Dubai, who are at least partially deeply indebted to the ruling family in Abu Dhab for bailing out their 800 metre tall skyscraper, and who in turn hold part of Virgin Australia and Air Berlin etc. Emirate is an incredibly fast growing and profitable full service carrier apparently set up to help create economic activity that will bring prosperity and stability to an otherwise scary part of the world. Emirates collects trophy sponsorships, like the Melbourne Cup, stadiums, football clubs, and in the next few weeks, a giant gondola system to bridge a missing gap on the London Underground just in time for the Olympics. It’s all really quite simple and harmless, but popularly misunderstood.
Anyway, before Joyce went to Canberra to say the airline he had supposedly lead since 2008 could go broke, there was an immense amount of hype about a possible closer link with Emirates (emanating from sources that included some in Qantas) about a deal with the Dubai based carrier ranging from it taking a 25% equity in Qantas to ho-hum codesharing or other potential alliance activity.
Like the Red Q Asia-based carrier hoopla of last August, and the subsequent heavy breathing from management about death threats that a NSW police task force investigated with no result, the Emirates excitement came to nought. After which Qantas appears to have suddenly remembered it needed to make a very late profit down grade disclosure to the ASX, and the Qantas share price dived over a cliff.
While this situation unravelled for shareholders, Joyce resorting to announcing a capacity and fare war with Virgin Australia, which outgrew every other airline in Australia in domestic traffic in April. Yet Joyce has already conceded domestic yields are looking sick. He and would know better than anyone from his tenure at Ansett that fare wars aimed at a better run competitor will burn, hard, and deep, and possibly fatally.
Since Joyce took over running the airline it has lost market share abroad, stopped paying dividends and gone EMO over its capital expenditure challenges. Plus it may well have seen the so-called domestic market share line-in-the-sand of 65% washed away by Virgin Australia if the latest traffic statistics are calculated to include the figures for Skywest, the regional and resources industry carrier which is now bound into what amounts to an exclusive commercial relationship with the Virgins.
There is no doubt Joyce knows how to connect the dot points as to Qantas’ weaknesses and potential new strategies, but there are reasons to believe he struggles to engage his staff and deliver on opportunities in Asia or further afield. From his controversial decision to ground the airline, stranding 100,000 people worldwide, to criticising his Qantas employees, to troubling changes to Qantas International, Joyce has become, inadvertently for sure, the voice that says his airline is headed for collapse.
Asking the political parties to rescue Qantas from its own errors, at significant cost to Australia’s national economic interests, not to mention by curbing its more successful Australian competitor in Virgin Australia, is a more than a bit rich.