Qantas Frequent Flyer - Time for a new CEO and Board

Was looking at the figures over the past few days, and I think it is time Qantas gets a new CEO, and the board is sacked entirely.

Poor Financial Performance
Since Alan Joyce became CEO, the Qantas share price has declined 59%. In the same time period, the share price of Virgin Australia has increased by 30%. Shareholders have not received a dividend during the time Alan Joyce has been CEO either. In the past week, shares have fallen 34% wiping $1billion from the company value.

Poor Staff Morale and Satisfaction
In 2010, Qantas was rated the #2 company to work at in the Randstad awards. Now it does not even feature in the top 20.

Declining International Network
In the time Alan Joyce has been CEO, there has been a massive contraction in the international network (Beijing, Mumbai, Perth-Tokyo, Melbourne-Shanghai, San Francisco, Cairns-Japan and 2 London flights just to name a few). The management team has failed to leverage on any new partnerships in this time, whereas Virgin has established new agreements with SQ and EY.

Jetstarisation
Jetstar is getting all the new aircraft - yet Jetstar Asia has only made a profit 1/9 years, Jetstar Pacific has been nationalised. Where are these supposed profits from the new joint ventures coming from?

It seems financial markets have woken up to one of the worst examples of management incompetence in Australian corporate history. You have shareholders who are angry. Customers who are angry. Staff who are angry.

Feel free to discuss!

Feel free to discuss!Broadly, I agree with the suggestion.

Was the choice between Joyce and Borghetti? Choosing Joyce may turn out to have been one of the company's biggest-ever mistakes. But the trouble is that it can be difficult to tell in advance what someone will be like. Walsh also had a "low-fare carrier" history, having turned EI into one in order for the company to survive. But he didn't do too badly when subsequently running a full-service airline.

As a QF employee, all the heat really needs to go on the board. They have escaped pretty well - the CEO is just the public face, the board make the decisions. They ultimately sign off on all major decisions so they have a lot more control.

Clifford should be punted first - the rest of them are really just 'yes men' and getting paid to agree with everything.

some of us have been calling for the removal of the CEO since the day he was appointed.

Borghetti should have gotten the job, but I am also glad he went to DJ and turned them into a viable domestic competitor - we were too long without one.

Declining International Network
In the time Alan Joyce has been CEO, there has been a massive contraction in the international network (Beijing, Mumbai, Perth-Tokyo, Melbourne-Shanghai, San Francisco, Cairns-Japan and 2 London flights just to name a few). The management team has failed to leverage on any new partnerships in this time, whereas Virgin has established new agreements with SQ and EY.Also MEL-NRT which saw frequency cut back shortly after AJ took over as CEO before being removed entirely 6 months later.

Well ultimately it's the shareholders and the Board who will make this call. Judging by the overwhelming shareholder support (yes, the arguments about the motives of institutional shareholders have been well-rehearsed) for his remuneration package, he won't be going anywhere soon.

Personally, I don't really want him removed.

While I agree with some of the sentiments, and as a shareholder am in the red, a few alternative views on some points.

Poor Financial Performance
Very few airlines without poor performing share prices. Virgin over a longer term is no better. Floated in 2003 at $2.25. Toll had to give the shares away a few years later finding no buyers. Substantial share price decline despite growth in market share and size. Qantas also much more heavily weighted to Intl which is where everyone globally is struggling - see Kingfisher, Cathay, Singapore. Domestic has saved Qantas. Without the Taa/Australian merger QFI would have gone under in 2007 and probably again now.
Greatest concern at the moment is fleet purchases (and this is not just for Qantas but a worry for a lot of airlines around the world) - with low profit, decreased access to debt and a share price that makes raising meaningful dollars hard - how do you fund the capex

Poor Staff Morale and Satisfaction
Not surprising when you have union issues. Much easier to have good morale when you are lean with competitive wages and work practices, versus bloated with high wages and restrictive rules. I remain of the view that the grounding was right - the disruptions up to that point was impacting business - I know a number of almost sole Qantas accounts that were shifting substantial business to Virgin... You let this continue too long you lose them permanently... Instead these accounts are back with Qantas.

Declining International Network
If routes aren't making money well you go to profitable routes. I suspect though. QFi has increased seats on major routes by adding A380s. As for partnerships much easier to add when you start with none - QF already has great partners and I daresay is restricted in what it can do by oneworld. The Qantasia proposal was an attempt to fix Asian gaps, but obviously announced way too prematurely - hopefully when MH joins oneworld that will create more options than the current CX relationship or lack thereof

Jetstarisation
Last time I looked didn't see 12 A380s, a bunch of 7378s with ife and skyint and A330s with a star on their tail.
Given the lccs generally lease aircraft, they are low capital investment so I suspect the $s Qantas has at risk in Asia is minimal, thus any return is a good one. Versus international which has billions in capital and assets and loses a boatload.
On Jetstar Pacific, my understanding is QF owns 30%, Vietnamese Govt 70%. All that has happened is the stake has transferred from a fund to Vietnam Air
On Air Pacific, QF had been trying to sell out for a while... What can they do with that Govt... Invade

QFi is the dog in the room saddled with archaic work practices, too many staff, high wage rates, based at expensive airports and old planes (part down to years of paying dividends rather than buying planes, part Australian Govt tax laws and part delays in A380s and 787s) and crazy international competition. Unfortunately unless fuel drops substantially, or airfares go up substantially, many global airlines including QFi are in real trouble.

As a QF employee, all the heat really needs to go on the board.

QFi is the dog in the room saddled with archaic work practices, too many staff, high wage rates

Management blames the employees and the employees blame the management. Hmm, signs of a badly-run business.

As a QF employee, all the heat really needs to go on the board. They have escaped pretty well - the CEO is just the public face, the board make the decisions. They ultimately sign off on all major decisions so they have a lot more control.

Clifford should be punted first - the rest of them are really just 'yes men' and getting paid to agree with everything.

Yep, the CEO is just a puppet

Well ultimately it's the shareholders and the Board who will make this call. Judging by the overwhelming shareholder support (yes, the arguments about the motives of institutional shareholders have been well-rehearsed) for his remuneration package, he won't be going anywhere soon.

Personally, I don't really want him removed. He should go tomorrow (actually, last week).

Shareholders don't get a look-in, with a company that hasn't paid a dividend in God knows how long, shareholders are the last thing on the agenda of the board.

Dave

He should go tomorrow (actually, last week).

Shareholders don't get a look-in, with a company that hasn't paid a dividend in God knows how long, shareholders are the last thing on the agenda of the board.

Dave

Customers are also not on the board's mind.

They keep banging on about QFF and how good it is but forget that an airline in a first world country is nothing without it's FF programme.

AJ needs to go, and go quickly. Perhaps if James Hogan wants to leave EY, he could take over QF. From what I can tell, he has done a great job with that airline.

James Hogan has done a great job of expanding.

So long as you ignore the lack of profits, and continued equity investment.

How telling is it that one of the first announcements Mr Joyce makes as Chair of IATA is a call for LCCs to get more involved (http://www.theaustralian.com.au/business/aviation/alan-joyce-wants-to-bring-low-cost-carriers-more-into-iata-fold/story-e6frg95x-1226395860765)?

Is it because this is where his heart really lies?

Is it because his head says this is the only true future for global aviation?

Regards,

BD

Is it because his head says this is the only true future for global aviation?

As an example, just look at the number of RYANAIR and EASYJET aircraft that operate into FAO. The sky is jammed solid with these 737s and 320s. Good old BA can manage an E170 or something similarly small once a day - haven't they been blown out of the water by the future of aviation in Europe. No wonder the QF CEO thinks the way he does. The deal breaker is the price - not the colour on the tail of the aircraft. Nobody gives a rats about nationalism when they can score a good deal.

As an example, just look at the number of RYANAIR and EASYJET aircraft that operate into FAO. The sky is jammed solid with these 737s and 320s. Good old BA can manage an E170 or something similarly small once a day - haven't they been blown out of the water by the future of aviation in Europe. No wonder the QF CEO thinks the way he does. The deal breaker is the price - not the colour on the tail of the aircraft. Nobody gives a rats about nationalism when they can score a good deal.

The sky may be predominantly Orange at various european ports but that doesn't necessarily paint a rosie picture. A Stg90M loss is hardly something to base the global aviation future on, whereas Mr O'Leary's E503m profit may gladden the hearts of his shareholders but I'm not sure quite what IATA would make of some of his direction!

Regards,

BD