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Feb 13, 2014

Flying monkeys: Qantas wish list won't save Joyce's management

Alan Joyce has said the Qantas Sale Act is preventing the national carrier from further capital raising. This is nonsense.


There must be a focus group of sorts reworking the messaging from Qantas.

Last night CEO Alan Joyce emerged from under a five-week cone of silence to try to identify the company’s still imprecise requests for government help. And in his speech to the Tourism and Transport Forum in Canberra — attended by a number of Coalition MPs — he was speaking their language: the need for more industrial relations reform.

It just might help divert the attention increasingly being paid to the actual performance of his management.

Apart from going on the record with a request for a debt guarantee from government for the capital raisings it can no longer get because its debt has been downgraded to junk by Standard & Poor’s, Joyce’s speech said very little that was new. But it did hit another messaging button — the one marked “bad news is coming” — when Joyce said that few of the strategic or structural changes that were under wraps would be popular.

There are factual problems with this recasting of the messaging about the state of Qantas.

According to none other than the chairman of the particular tourism forum, Liberal MP for Wannon Dan Tehan, Joyce said the Qantas Sale Act was preventing it from further capital raising. This is nonsense. Qantas never had the slightest problem making capital raisings — most of them oversubscribed, under the “restrictive” Qantas Sale Act — until the current management took over five years ago.

It was often argued that the QSA actually improved the attractiveness of Qantas to overseas investors because it guaranteed that at least 51% of the enterprise would be supported by Australian investors on the share register because of the cap on foreign domiciled shareholders. Qantas raised $1.2 billion from offers that were often jointly supported by domestic and foreign investors in nine offers pre-Joyce.

In terms of IR reforms, Qantas surrendered its control over enterprise bargaining outcomes to the compulsory arbitration of Fair Work Australia following the $200 million exercise in which it shut down the airline and stranded almost 100,000 of its customers in 2011. Exactly where Qantas can go with IR reforms for its key unions for the duration of those newly determined agreements is the question.

One answer may be to shut down more of the full-service and largely unionised Qantas brands and give even more of the business away to the world’s largest government-owned airline, Emirates, reducing further the scope for the QSA to apply to its operations to something closer to symbolic levels.

“… the more awkward, unresolved questions about the future of Qantas are being masked by an IR reform sideshow.”

What Qantas has been keen to suggest in private is that the QSA might be politically untouchable, but it is capable of constructive reinterpretation in so far as it never envisaged and thus does not specifically prohibit innovative uses of subsidiaries like Jetstar or Jetconnect .

Nor their sale, in full or in part.

There is confidence being heard that Qantas can dramatically improve its books by realising all or part of assets like terminals or the loyalty program. But some funds and analysts are concerned that the assets that now form part of the group value of Qantas might not support it as an investment in the medium term.

This part of the future of Qantas debate going on in the investment world is one that can be conveniently pushed out of centre stage by an IR diversion. It is clear that Qantas has not decided how far it will pursue some of the more controversial options to change it business or reduce its exposure to the now struggling domestic as well as international arms of the full-service brand.

Joyce has now set Qantas up to purchase from government some form of debt guarantee to lure capital investment back to the carrier. That is, it will spend money transferring the risk of such investments to taxpayers in order to get attractive terms from sources of additional funds.

It seems implausible, however, that such a guarantee could only be selectively made available to Qantas. If Qantas is to get such a leg up, why not Virgin Australia? The net advantage in this debt guarantee game might prove to be very small.

But for the moment, the more awkward, unresolved questions about the future of Qantas, and any government assistance, are being masked by an IR reform sideshow. Government will support IR reforms, a win for Qantas in terms of its message, but is far from convinced about assistance measures for any badly managed company, where no amount of spinning may save Joyce.


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22 thoughts on “Flying monkeys: Qantas wish list won’t save Joyce’s management

  1. rumtytum

    There’s a widely held fantasy amongst management types that their companies exist to reward senior executives, shareholders and board members. The truth is that companies are usually set up to sell something, and if they do that job well the company thrives. Instead of doing its job well and making its earnings increase, Qantas cut its staff, cut its service, cut its quality, so making its earnings decrease. And as its earnings decreased Qantas cut more staff, more service and more quality, and its earnings decreased again. I recently emailed Qantas, complaining about the absurd delays in speaking to somebody on the phone. A couple of days later I got a message, telling me to phone the usual number for assistance. When I phoned I got a recorded message to say the expected wait time was over 40 minutes. Why would anybody persevere under those circumstances?

  2. Paul Bendat

    Govt should insist on KPIs before considering giving Qantas awful management anything at all.

  3. Observation

    As part of my work in business I would spend half of my time travelling on both domestic and international flights. Give me Singapore airlines and Virgin any day. Since Joyce has been at the helm the quality of service and reliability has been on a constant downward trend. So why would anyone want to invest in such a badly run company??

    The hard decisions have not been made at Qantas, only the head kicking kind which is popular with certain parts of the business community.

  4. zut alors

    Joyce: why is he still there?

  5. Stephen

    The first condition of any Federal bailout should be that Joyce goes to the scaffold, before he completely rationalises the company out of existence.

    Alternatively, is it too late to revive that grand old Irish tradition of sacrifices in peat bogs?

  6. Mal Phillips

    Joyce made a serious error in 2011 by stranding many loyal passengers with little or no notice. As with all businesses success depends on attracting and keeping loyaql customers. Joyce is clearly not a marketing person and should resign or be terminated ASAP.

  7. Geoff Saville

    Looking at ALL the time Mr Joyce has been at the helm of Qantas there seems never to have been any good news for the company. He’s unpopular with most staff as well…Yet he remains. That looks odd. The whole board looks odd because of it. Absence of any kind of heart too I think. On a subjective level, my internal radar pegged Mr Joyce as enemy aircraft the day I laid eyes on him. If Mr Joyce stays with Qantas, he and cronies may soon float gently to earth in their golden parachutes while airline and staff hurtle to their doom.

  8. AR

    Joyce is doing a wonderful job in reducing costs by cutting staff, routes, service standards etc. If it were not for those damned whining customers it would fly like a … brick.

  9. Steven Grant Haby

    Just had a friend land in Hobart from Melbourne and was told Qantas is grounded from midnight night. Friend was on a prop job from MEL to HOB staff appear stunned. Any confirmation or just rumours?

  10. botswana bob

    So the Age of Entitlement has not quite ended yet. Presumably the plan is to launch a full frontal assault on the unions: those same terrible awful unions who were at the root of SPCs problems and ran Toyota out of Australia, according to phoney Tony and big wide Joe. This will of course be loudly supported by LtdNews.When Joyce shut down QANTAS and left passengers stranded LtdNews ranters all produced similar pap depicting Joyce as an Anglo-Celtic battler from the top end of Struggle Street.
    The most interesting issue is what fate awaits Joyce and his fellow managerialists.The economic rationalists keep bleating that if an employee doesn’t perform s/he is out. Will this apply to the grossly overpaid/overbonused managers like Joyce?
    I was on a QANTAS flight that had left the gate when Joyce decided to offload his customers with no warning far from their destinations. The flight returned to the gate and passengers were dumped at the departure lounge. I have never taken a QANTAS flight again. This little Irishman should be given a one way economy class ticket back to the Emerald Isle.

  11. The Old Bill

    Interested you still use the term “full service Brand” Ben.
    I used to only fly QANTAS until a three years ago. I try to force myself to still, in the vain hope that Joyce will realize that good service and quality food is something most people are prepared to pay a premium for on long haul international flights. Sadly I find myself regularly flying Singapore, BA, Turkish, anybody but QANTAS. Maybe AJ should take a round the world economy flight with “One World” partner airlines. Apart from American Airlines, QANTAS food and freebies are now the worst of any and there is no way I am giving my money to the corrupt UAE masters who now supply QANTAS’s only “full service” flights via Emirates codeshares.

  12. MJPC

    Thank you Ben for giving us the facts (as against the spin being generated by the usual suspects). Rumtytum you have summed it up also as to the belief that companies exist for those with snouts in the trough, rather than to supply a service the customers wish to pay for. Alas, Australian business in general fall in the gouging (i.e the banks)rather than giving camp.
    The fact that Joyce has been welcomed with open arms by the Government says that he is going to be involved in a union blaming/bashing exercise via a’ vis the waterfront dispute. The Libs love identified baddies they can target for the braindead body politic who voted this lot in (i.e Refugee’s). No better example being Joe Hockeys comments about the bully weight of Virgin yesterday…give us a break. You don’t save a company by calling the competition names, you get in their and make them the best so people will buy from them.

  13. Itsarort

    Like our current Gov, Joyce’s economic rationalism is largely philosophical and pragmatic. The overall result,…, a stunning failure!

  14. chpowell

    Sure, Joyce is incompetent, but I don’t think this is the root cause of Q’s problems.

    Who/what is?

    Leigh Clifford. Who in their right mind would believe it a good idea to elect a union busting, labour hating miner (37 yrs @ Rio Tinto) to chair a company in a service industry?

    The word from the Q boardroom is that he stands over Joyce and screams orders at him.

    The whole board needs to be spilled (our incoming Governor General was part of the problem) and people installed who at least have a partial understanding of what the actual problems are and what needs to be done.

    Joyce is just Clifford’s ‘useful idiot’.

  15. chpowell

    ps If the Australian government is going to extend its credit rating for qantas to issue more debt, it should insist on an equity stake in the company, a spill of the board and at least two directors on the new one.

    Analogous to Kerry Packer buying into Westpac in ’91 @ $5.25/share. Both he and Al Dunlop became directors immediately. Frank Conroy (MD) got the heave, and ultimately Bob Joss became Managing Director.

  16. Brett Mulheron

    A man is alone in an airport lounge. A beautiful woman walks in and sit down at the table next to him. Because she’s wearing a uniform, he quickly concludes that she’s probably an off-duty flight attendant.

    The man then decides to have a go at picking her up by identifying the airline she flies for, thereby impressing her greatly.

    He leans across to her and says the British Airways motto: “ To Fly. To Serve. ”

    The woman looks at him blankly

    He sits back and thinks up another line.

    He leans forward again and delivers the Air France motto: “ Winning the hearts of the world.”

    Again she just stares at him with a slightly puzzled look on her face.

    Undeterred, he tries again, this time saying the Malaysia Airlines motto:” Going beyond expectations”

    The woman looks at him sternly and says, “What the f**k do you want?”

    “Aha,” he says, “Qantas!!”

  17. Frequent Fixer

    The bottom line here is, if Joyce manages to con something out of the Government to prop up his incompetence, he’ll probably get a bonus for it next year. If the Government really wants to help Qantas, they should insist the CEO, the board and all their cronies resign and then take a seriously look at whether the Open Skies policy is in the national interest. So called Airlines such as Emirates, Etihad, Singapore, Thai, Malaysian, China Eastern, China Southern etc, are all government sponsored carriers, whose sole purpose is to funnel people through their country or region. These governments make money from landing people in their country or city, not moving people. Qantas can never compete with that, regardless of how efficient they are. When you compound this with grossly incompetent management, which has created huge structural problems, the future looks grim.

  18. macca

    Powell: good point. So many people here (staffers?) beat up on AJ. He is the (expensive) fall guy. The board are clearly pulling the strings.

  19. chpowell

    @ macca: another view:

    There’s a reason why tyrants like Clifford, Dick Fuld, James Dimon stay on at the top for so long: weak boards.

    I would certainly place Q in this category.


  20. Hamis Hill

    Doesn’t this airline have an exemplary safety record?
    Here is hoping it crashes and burns economically, before the present poor management cause any real crashes.
    In that event, of a fatal incident, consequential to said poor management, the correct punishment, in accordance with the medieval mind set driving said “management”, will be to track down the culprits, and drag them screaming to be burnt at the stake? No?
    These “born again” medievalists infesting the management class in Australia should be careful what they wish for.
    No up against the wall for them when push finally comes to shove in Abbott and Bernardi’s somewhat religious “Revolutionary Battlelines”.
    They might wish to rein in their somewhat inflammatory rhetoric.

  21. chpowell

    ps Q’s board of directors: consists of ppl with backgrounds in construction, mining, energy, law [freehill’s], chemicals, banking, financial services,* tobacco.

    two directors have specific airline management experience: Joyce, and William Meaney (former VP in SAA).

    Save for the last two, Q’s directors sets sail with the company into the great unknown….

    * one of them was a director of Allco, one of the largest corporate bankruptcies in australian history with losses > A$10B

  22. Brendan Jones

    QANTAS has been investing (not sure that’s the right word) in overseas ventures which seem ill-conceived. e.g. Jetstar Japan expects Tokyo air commuters to travel an hour to distant Narita instead of using the Tokyo’s local Haneda airport (like asking people departing Sydney to fly out of new Newcastle), at that in a country with a very convenient bullet train network (no time wasted traveling to, from, sitting around the airport): http://www.airliners.net/aviation-forums/general_aviation/read.main/5966413/

    Given Qantas is making a loss on overseas ventures, why on Earth should the taxpayer be propping it up in any way, shape or form, especially with the same management team at the helm? http://blogs.crikey.com.au/planetalking/2013/10/31/jetstar-problems-emerge-in-japan-and-china/


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