Christopher Niesche: Departing Qantas boss leaves train wreck in his wake

OPINION

A few months ago, Alan Joyce was probably looking forward to his retirement as a celebration of 15 years at the helm of Qantas.

His swansong was to be the airline’s annual general meeting in November, when he would be thanked by grateful shareholders for steering the airline through Covid and delivering a record A$2.5 billion ($2.7b) profit in the latest financial year. He might have expected plaudits from politicians, business leaders and colleagues.

Instead, he resigned in disgrace last Monday, with his departure rushed forward to last Wednesday.

Joyce leaves behind him a national carrier in crisis and arguably in a more difficult position than even at the height of the Covid travel bans, when it could at least count on government support.

If ever there was a test case for the theory of stakeholder capitalism, it’s this.

Stakeholder capitalism represents the wholesale rejection of economist Milton Friedman’s 60-year-old theory of shareholder primacy, which states “corporations have no higher purpose than maximising profits for their shareholders”.

Proponents argue it is only by taking account of all stakeholder groups - staff, customers, government and regulators, the community, the environment and of course shareholders - that companies create long-term sustainable value.

Those which ignore stakeholders do so at their peril.

If this holds true, then Qantas has a grim future. There is hardly a stakeholder group it hasn’t antagonised.

Customers are upset because Qantas has been hoarding A$570 million ($619.89m) in Covid-related refunds with a Kafkaesque claims process that is driving customers mad. Until recently it had a December 31 deadline for refunds, after which it planned to keep the cash it was making so difficult for customers to get back.

Then there are the ghost flights. We learned this month that, in 2022, Qantas allegedly sold tickets for 8000 flights it had already cancelled. Qantas continued selling tickets on flights for an average of two weeks and up to 47 days after the flights had been cancelled.

To make matters worse, Qantas wasn’t cancelling the flights because of mechanical problems or staff shortages. It was pursuing “yield management”, that is, maximising the profit per seat.

It meant that, by the time Qantas told customers their flight was cancelled, they had to buy more expensive replacement tickets. In some cases they were forced to pay for an additional night’s accommodation if they couldn’t get connecting flights.

Australia’s competition regulator is prosecuting Qantas for the ghost flights and seeking hundreds of millions of dollars in penalties.

Qantas CEO Alan Joyce Joyce flew into the sunset on Tuesday with a A$25m pay-packet for this year. Photo / Dean Purcell

There’s also the broader travelling public, who are paying higher prices because Qantas has quashed competition. The latest instance is persuading Prime Minister Anthony Albanese and his Government not to allow Qatar Airways to double its flights to Australia. This will ensure demand for overseas flights outstrips supply and Qantas can continue to charge inflated prices.

The Government already looked complicit in doing favours for Qantas when it blocked Qatar Airways and couldn’t come up with any credible reason as to why. The most recent revelations now make it complicit in fattening the coffers of a corporation lying to, and ripping off, the Australian public.

Add to that Joyce’s staunch refusal to return any of the A$2.7b ($2.9b) in taxpayer funds received to help it stay afloat during the pandemic, despite Qantas’ good financial health. So we can add taxpayers to the list of disgruntled stakeholders.

Then there is the staff, who have watched on in dismay as Joyce pushed through redundancies and tightened up on employment conditions while claiming ever-larger multi-million dollar salaries and bonuses.

Joyce flew into the sunset on Tuesday with a A$25m ($27m) pay packet for this year, leaving behind a spectacular train wreck for new CEO Vanessa Hudson to clean up.

But Hudson will find the cosy relationship the airline has enjoyed with the Government has soured and there won’t be any more favours or concessions. In fact, in the coming years and months the Government will reconsider competition in the aviation sector.

The travelling public is so disgusted with the airline’s behaviour that they’ll take alternatives wherever possible. No amount of heart-warming PR shots of Qantas jets evacuating Australians from foreign disaster zones (omitting the hefty bill sent to the Department of Foreign Affairs and Trade for the flights) will win the public back.

And as for any staff going the extra mile for their employer, forget it.

Business might be harder without stakeholder support.

There are also questions about whether Hudson is the right person for the job. The former CFO was touted by Qantas as the architect of its post-Covid turnaround. Now that we know this was based on ripping customers off, lying to them and hoarding their money, we’d have to ask if Hudson is the right person to give the airline a fresh start.

In his years as CEO, Joyce cancelled orders for new aircraft and let the average age of a Qantas aircraft slip from eight years to 14, helping to boost profits during his tenure.

His final parting gift for Qantas and Hudson is an airline in need of a A$15b ($16.3b) fleet upgrade.

Bon voyage Alan.

Christopher Niesche is an Australia-based financial journalist 25 years’ experience on Australia’s major newspapers, most recently as deputy editor of the Australian Financial Review.