Update
Managed to retrieve story number 2
Wirraway
Sat "Weekend Australian Financial Review"
2. Geoff Dixon: oxygen is required
Jul 05
Adam Shand
PART A
When things get really tough at Qantas headquarters, chief executive Geoff Dixon is apt to scratch his head and say with a smile: ``Well, I'm just a simple country boy from Wagga.'' It sounds folksy and self- deprecating, but for Qantas managers beloved of complexity, the simplicity of "Wagga-nomics'' is threatening indeed. It demands executives justify their positions in plain terms, that they cut the spin and get to the point. Dixon knows the time for spin is well past, that Qantas must now be absolutely fearlessly honest with our problems''.
He constantly tells his managers "to get out there and tell what the truth is. You are going to fix the problem a lot more quickly than trying to dissemble.'' Wagga-nomics is the knife Dixon must wield to deal with an organisation deeply ambivalent about change, a labour force still steeped in bureaucracy and union bastardry. It's Dixon's greatest challenge, and critics say perhaps he is bringing a knife to a gun fight. Observers question whether Dixon is tough enough to triumph in a battle with his own organisation; whether, indeed, the task is beyond a single manager.
"I have always known what the problems are; the problem is to fix them in a very large organisation. Over 83 years, all traditional airlines have built in processes that are not needed, and unions have been party to that. There's a hell of a lot of practices that aren't in EBAs [enterprise bargain agreements], what we call custom and practice,'' he says.
Dixon told Weekend AFR to expect in the next month some significant management initiatives aimed at driving "greater P&L [profit and loss] responsibility'' across all of Qantas's "silos'' business-school jargon for management fiefdoms.
Dixon has assembled a "Sustainable Futures'' team, an elite group of managers reporting directly to him. As he prepares to take his plan for restructuring Qantas to the board next month, he has instructed this team to assess every aspect of the business, reaching deep into the silos.
"Geoff Dixon is one of Australia's leading CEOs. He's very decisive and he has a clear vision where he has to get to, but he's striking resistance from within his organisation and he'll have to deal with that, too,'' says ACTU secretary Greg Combet.
Qantas is learning to live with "constant shock syndrome'' as terrorism has become airborne and Asian markets have been devastated by the SARS outbreak. Since September 11, 2001, Dixon has used all his guile to buy time for Qantas, to allow this corporate adolescent the room to restructure on its own terms.
Now time is running out. Dixon has set himself the goal of cutting $1billion from Qantas's costs in just two years, while meeting potent challenges on domestic and international routes. He faces revitalised competition from lean and mean Asian carriers such as Cathay Pacific and Singapore Airlines and new entrants like Emirates Airline. And one-time Dixon allies like Prime Minister John Howard's former public service chief Max Moore-Wilton have changed sides. Moore- Wilton, now running Sydney Airport, is championing the entry of new players like Emirates. Now free of political constraints, Moore-Wilton is promoting the heresy that the national interest and Qantas's interest are no longer indivisible, Dixon must make Qantas more efficient rather than rely on lobbying government to block foreign interlopers. Last month, Transport Minister John Anderson rejected Emirates's bid to operate twice daily flights from Sydney to Europe via Dubai, but he has promised to revisit the issue in November.
Moore-Wilton is not waiting for November; he says he'll be back in Canberra soon and believes it's inevitable that Emirates will get what it wants.
It's easy to characterise the issues between Dixon and Moore-Wilton as a battle, but they remain good friends and there are many points of agreement. Yet Dixon has been discomfited by Moore-Wilton's change of heart on Qantas. "He's had quite a metamorphosis from Canberra to Sydney,'' he says. "Max is running a costs-plus business, a monopoly in fact. Give me Max's position any day.''
Which is not to say Dixon hates competition a frequent criticism of the Qantas chief.
"There is no company in Australia that faces more competition every day. We have 38 competitors there's no major Australian company that can say that. You've got to remember that over 70 per cent of our assets on any given day are in our international operations,'' he says.
Emirates's success in bringing many federal and state politicians into its corner clearly irks Dixon. He fires back with familiar arguments about the level of government subsidy that Emirates enjoys, which effectively means "it can't go broke''.
"If anybody believes that Emirates is not an arm of the government hell-bent on creating another Singapore [in Dubai], they're kidding themselves ... Emirates has got a chairman [Sheikh Ahmed bin Saeed Al-Maktoum] who is chairman of the civil aviation authority, he's chairman of the airports so he's really Max Moore-Wilton, John Anderson and Geoff Dixon all rolled into one. I would really have Qantas buzzing if I could run civil aviation policy and Sydney Airport,'' Dixon says.
Anderson, perhaps mindful of the tag "Minister for Qantas'', is determined to promote the national interest over the sectional interests of airlines and airports. "We've got to keep them [Qantas] under enough pressure so that we make sure we have an efficient aviation sector, but we do recognise it's still in the national interest to have a Qantas at the end of the day,'' Anderson says. He's not persuaded by Dixon's argument that Qantas may be forced to close down unprofitable feeder regional routes if it loses international market share to carriers like Emirates.
A Hong Kong-based aviation analyst with JP Morgan, Peter Negline, says the focus on Emirates misses the point that Qantas is facing much more potent threats closer to home from Asian carriers like Singapore and Cathay. "Cathay's David Turnbull has 26 years in aviation and is a terrific operator. Singapore's new chief executive, C.S. Chew [Chew Choon Seng], has 30 years in aviation and is very smart a clear thinker who sees things in very black-and- white terms,'' Negline says. "Both are running airlines that are now lean and mean after years of restructuring in the midst of crisis. Their principle growth was into China but that was before SARS; now, instead, they are looking to an affluent market like Australia for growth. Geoff Dixon has a reputation for being tough and shrewd. Well, he had bloody well better be, because the competition is just as good, if not better.''
Dixon's immediate problem is how to compete when his fleet is ageing. Negline says Qantas will have to buy up to 90 new jets over the next decade simply to replace existing aircraft. The decision to put off new purchases in the 1990s meant Qantas could post record profits, but now it has one of the oldest fleets in the region.
Dixon accepts responsibility for this policy, invoking what he calls "the streaker's defence it seemed like a good idea at the time''.
END PART A
===========================================
PART B
An issue like Qantas's punctuality performance highlights the difficulty Dixon faces. In July 2001 Qantas initiated its inter-urban Cityflyer service to counter the threat to its business market from low-cost carriers like Virgin Blue on the Sydney- Melbourne run. Now it appears Qantas is falling below its targets for punctuality. According to an internal Qantas report for the week ended July 1 , only 42 per cent of flights between Sydney and Melbourne took off within three minutes of schedule. Only 35 per cent of Sydney-Brisbane flights got away on time, while the overall average for domestic routes was 37 per cent.
A Virgin Blue spokesman says Virgin's percentage of on- time departures in June was "in the high 60 per cent range, and that was not one of our best months''.
Qantas international flights were even less reliable, with an average of only 29 per cent taking off within three minutes of schedule. However, this rose to 64 per cent when using a 15 minutes from schedule measure, the standard for international operations.
More worryingly for Qantas International, a confidential customer satisfaction survey seen by Weekend AFR concludes that satisfaction has ``plateaued below the desired premium level''.
On Qantas's domestic performance, Dixon says this was a particularly bad week marked by foggy conditions in Sydney and Melbourne. However, he says punctuality is a key performance indicator for management and he is unhappy with progress so far. The collapse of Ansett (in September 2001) left Qantas with the entire domestic market; it has taken some time for Qantas to adjust to the demands, he says, but punctuality should now improve.
Qantas insiders say the reasons for the delays lie in the complexity of the airline's operations. When ground staff report a problem to line management, it can take months for remedial action, such is the bureaucratic nature of the airline. This acts as a disincentive for reporting problems, the insiders say.
The second, more pressing, issue is the eight different aircraft configurations that Qantas operates on domestic routes. If an aircraft is grounded, it can be difficult to provide a replacement with a similar configuration, say insiders. JP Morgan's Negline estimates that Qantas has at least 23 different combinations of airframe, engine type and seating configuration across the group. This compares with just nine combinations at Cathay and eight at Singapore.
Negline expects that with at least 9 new aircraft to be purchased each year over the next decade, Qantas will quickly try to streamline its fleet. Streamlining the fleet will also help Qantas to address its industrial relations problems, as new-generation aircraft such as B737NG and A380 have been designed with enhanced work practices in mind.
Dixon expects up to half his cost savings to come from labour and has announced that 2000 of Qantas's workers will be made redundant, 800 will go from attrition and another 400 to 600 full-time jobs will become part-time.
The ACTU is one of Qantas's most implacable foes yet Combet is a great admirer of Dixon, as are many of the airline's union officials. Combet says Dixon's problems lie not with the unions but in bureaucratic inertia in middle management.
Combet says Qantas has used a "divide and rule strategy'' by staggering the negotiations for enterprise bargains with its 14 unions, rather than trying to negotiate company-wide agreements simultaneously. In any given year, Qantas might have seven EBAs to negotiate, which has led to an unwieldy industrial relations apparatus. Negotiation is almost constant and disputation is frequent. A stoppage was looming this week over plans to introduce drug and alcohol testing of employees, including a mandatory provision that workers reveal any prescription medication they are taking. In an atmosphere of mistrust, union officials believe the tests will be used to target troublesome workers for dismissal. Anderson is scornful of Qantas's industrial record with its unions.
"It's a dinosaur. In some ways it's a reflection of some of the things that were so bad about industrial relations in the 1960s and '70s,'' he says.
Dixon applies Wagga-nomics to his direct dealings with labour officials, much to the frustration of his tough-talking industrial relations managers. Until last year, Dixon would meet officials and shop stewards of Qantas unions twice yearly to discuss their problems. However, this practice has been wound back as Dixon would countermand the edicts of his managers.
"When you get him one to one over a glass of merlot, he makes commitments with you and he stands by them it sends the Qantas IR guys berserk,'' says one. Dixon makes no apologies for countermanding his staff: "The board countermands me, so I can countermand my staff.''
He believes he brings a fresh perspective to IR from his career negotiators and he says he intends to resume direct talks with officials the get- togethers were suspended only because of a lack of time. Dixon agrees that he is frustrated with the continual focus on industrial relations but says negotiating all agreements with 14 unions at once "would be a nightmare''.
"The jury is out on that one, Greg [Combet] and I have discussed dealing with the ACTU as sole representative and there have been very animated discussions within Qantas on that ... There's a view from our negotiators that if they want to take you on, they can bowl you over much more quickly,'' he says.
Dixon is clearly the man in the hot seat at Qantas; there's little evidence of succession planning. Observers says none of the present members of the executive committee has the all-round skills, including international experience, to take over if Dixon decides to leave before his contract expires in December 2005.
On his worst day, does he ever think of chucking in the Qantas job and heading back to his pub in Wagga? ``Wagga always looks pretty good to me. My mum and dad are buried there. I've got some mates there but no, I would be kidding myself,'' he says. "I love this.''
==========================================