Tue Sep 5

Will it be greener pastures for Qantas as Alan Joyce takes off?

Written by: Rico Merkert, Professor in Transport and Supply Chain Management and Deputy Director, Institute of Transport and Logistics Studies (ITLS), University of Sydney Business School, University of Sydney

A turbulent two weeks for Qantas have today culminated in its group chief executive Alan Joyce fast-tracking his retirement by two months to help the organisation and its brand accelerate its renewal ^[1].

Joyce was on the way out in any case, and was paid a board-approved bonus worth more than A$10 million ^[2] on Friday, to which were to be added short-term and long-term bonuses taking the total to $24 million ^[3].

What the early retirement will do is bring forward the arrival of chief executive-designate Vanessa Hudson to tomorrow, to enable her to drive a cultural change and a new strategy.

It is not unreasonable to assume she will say that what happened in the past is Joyce’s legacy and that under her leadership the airline will transform and essentially start with a clean sheet.

Man and woman standing in front of a plane engine

Vanessa Hudson (right) is expected to change the culture and strategy at Qantas and put the legacy of Joyce (left) behind her. AAP ^[4]

The new chief’s key challenges

Accelerating renewal of the fleet to improve its carbon impact is likely to be at the core of Hudson’s strategy. While the arrival of these “better for the environment” planes is expected to be expedited, the challenge for Hudson is to find the A$12 billion to A$20 billion that will enable Qantas to get to these greener and more sustainable pastures.

Taking greater care of the environment and the communities that Qantas serves, and having this as a key pillar of the renewed strategy and corporate communication, will be good for the airline. It will allow it to transform into an internationally and domestically competitive carrier, fit for the future in which climate change will become an even more pressing issue.

What many commentators are questioning is why Joyce was allowed to retire early. In fact, the board may have recommended he do so.

Regardless, this latest twist seems like an easy way out, as it saves him from fronting shareholders at the upcoming AGM, during which he would have had to respond to angry questions and account for the crisis Qantas is now in.

Two Qantas planes sitting nose to tail on a tarmac

Updating the fleet and making it more environmentally friendly will be among Hudson’s key priorities. AAP ^[5]

This will now be the board’s role and will include, among other things, fielding questions around the chief executive’s bonus (including the retirement package, which was going to be announced as part of the annual report presented to the AGM) and his performance. The ACCC allegations around selling tickets on cancelled flights, the pending court case related to COVID flight credits, the damage done to the brand and how to repair it will also be raised.

Did Qantas sway the government to block Qatar?

There will likely also be questions around Qantas’s role in lobbying the Australian government to reject Qatar’s application ^[6] to essentially double its air traffic rights (three more daily flights to Sydney, Brisbane and Melbourne).

This would have helped restore capacity - and thus drive down airfares - on the Europe-to-Australia sector, which is still 30% below pre-pandemic levels.

That, however, may be a question that should be directed at the government. Yesterday, Prime Minister Anthony Albanese even felt the need to declare ^[7] he had not been lobbied by Qantas on the Qatar Airways decision.

When I read this, I wondered, was someone at Qantas not doing their job? As applies to any ASX listed company and airline in the world, they have an entire department that does nothing else but lobby politicians. That is how the game works and is entirely accepted.

As outlined in my analysis ^[8] published on The Conversation last week, bilateral air service negotiations are a government affair akin to trade agreement negotiations.

The Australian government will, on a regular basis, negotiate with the governments of Qatar, Singapore, the United Arab Emirates, the United States and others on such matters, and airlines at both ends of the negotiating table will lobby their respective governments.

Based on what is in the best interests of the country, the government – in our case the Transport Minister Catherine King – then makes a determination. There is, therefore, opportunity for the government to revisit such decisions or come to a less restrictive determination in future rounds.

All of the above suggests there is huge potential for a fresh start and for building a better and more sustainable future for Australia’s largest airline, which will be beneficial to Australian travellers and the economy at large.