Future of Qantas in jeopardy: Joyce (Merged)
With the greatest respect, I would imagine that the decision about Borghetti and Joyce was made by the Board on the recommendation of Dixon, and Dixon would never recommend Borghetti.
The reason for this is simple; the Board has "buy in" on Dixons world view. They were sold his strategy, including all the Jetstar and "legacy airline" stuff and they fell for it hook, line and sinker. I'm sure it was most convincing, I'd probably be convinced myself.....
......Except that old Sunfish believes that people are funny animals that often do strange unaccountable things but that respond to decency, fair treatment and a little good leadership. I suspect that Borghetti believes the same as me, or he wouldn't be working for the likes of Richard Branson.
Philosophy is rather important at the top of any organisation. It is all about that "core values" stuff. Business strategy always reflects those core values and all employees have very sensitive bullshyte detecting antennas that immediately detect them. This is why Two different people can say "our people are our greatest asset" one gets applause, the other gets a horse laugh.
The Board simply could not appoint Borghetti without jettisoning everything that Dixon stood for.
Borghettis is now getting the opportunity to prove the superiority of his world view and philosophy over Dixons. He may win, he may lose, or he may be cheated. Time will tell.
As for Joyce? He has no strategic vision at all. He stands for anything and nothing. He is simply Dixons "MiniMe".
The reason for this is simple; the Board has "buy in" on Dixons world view. They were sold his strategy, including all the Jetstar and "legacy airline" stuff and they fell for it hook, line and sinker. I'm sure it was most convincing, I'd probably be convinced myself.....
......Except that old Sunfish believes that people are funny animals that often do strange unaccountable things but that respond to decency, fair treatment and a little good leadership. I suspect that Borghetti believes the same as me, or he wouldn't be working for the likes of Richard Branson.
Philosophy is rather important at the top of any organisation. It is all about that "core values" stuff. Business strategy always reflects those core values and all employees have very sensitive bullshyte detecting antennas that immediately detect them. This is why Two different people can say "our people are our greatest asset" one gets applause, the other gets a horse laugh.
The Board simply could not appoint Borghetti without jettisoning everything that Dixon stood for.
Borghettis is now getting the opportunity to prove the superiority of his world view and philosophy over Dixons. He may win, he may lose, or he may be cheated. Time will tell.
As for Joyce? He has no strategic vision at all. He stands for anything and nothing. He is simply Dixons "MiniMe".
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Spot-on Sunfish, Borghetti defined his integrity by having nothing to do with the APA bid for QF. He was the only one out of of that group of what , 24 (?) or so senior managers who were going to 'buy' QF, using private equity funds, to opt out. In essence, he curtailed any future career path he might have had in QF , his integrity obviously couldn't be bought and no doubt Dixon and the others would have despised him .
With apologies to South Park, Dixon is/was like Prof. Mephesto and Joyce his assistant Kevin, and they are turning Qantas into the Four-Assed Monkey, all very sad
With apologies to South Park, Dixon is/was like Prof. Mephesto and Joyce his assistant Kevin, and they are turning Qantas into the Four-Assed Monkey, all very sad
Last edited by Jackneville; 1st Jun 2011 at 22:55.
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Interesting to look back and review the historical account:
Read it, then re-read it and view things today through the prism of the Chairman of the Board also being a Senior advisor to KKR, one of the worlds largest private equity funds, the original .
Did Qantas chief bale out on real job?, September 01, 2007
Read it, then re-read it and view things today through the prism of the Chairman of the Board also being a Senior advisor to KKR, one of the worlds largest private equity funds, the original .
Did Qantas chief bale out on real job?
ONE of the top Qantas executives, John Borghetti, has come out with an extraordinary and highly troubling statement.
After an American Chamber of Commerce in Australia lunch on Tuesday, executive general manager Borghetti was quoted as saying Qantas CEO Geoff Dixon had been forced to "abandon" his day job while working on the failed takeover bid for the airline.
"Senior management ... (including) Geoff, Peter (Gregg, Qantas CFO), me ... a lot of time was taken up with this thing.
"It went about six months. You couldn't get your job done. You had to sort of abandon it."
Other executives, Borghetti added, "carried the company through" the period.
Now is this the Geoff Dixon who was paid a multi-million dollar salary to run Qantas? Or was this the Dixon who was part of the takeover team trying to buy Qantas at what became clear was a bargain basement price?
Either way there seems to be a difficulty, if what Borghetti was asserting is correct. And it demonstrates the very serious issues raised by these buyouts in which top management participate.
At a very simple level, a shareholder is entitled to presume that executives who are paid big salaries actually "do" their "day jobs".
Now obviously in multi-billion dollar highly complex takeovers, executives -- and especially the CEO and CFO -- are going to be drawn into supplying information, and having discussions with, the bidders.
As they are acting in the best interests of shareholders, that in a sense becomes their "day job". Borghetti's comment would be unremarkable. In an arms' length takeover.
But in this context who are Dixon and Gregg "working for"? In a perfect world, they could work for both. The shareholders and the bidders.
We do not live in a perfect world. Indeed the board of Qantas recognised the (obvious) conflict of interest; and established protocols so that Dixon and Gregg took no part in discussing the bid as directors.
Rather than solve the problem it exacerbated it; and showed all too clearly the unacceptable face of these management-involved buyouts.
First, surely the protocols should have gone deeper. That Dixon and Gregg could not help the bidder in the bidding process; in a real sense, help themselves.
That not only were they handsomely paid to "do their day job" -- run Qantas; but in the context of the takeover that is exactly all they should have done to avoid any conflict.
But secondly and worse, the board "inviting them out" of their two responsibilities as directors and the company's top executives, actually deprived shareholders of their most important resource in the takeover context.
Yes, governance "says" that's how you resolve the conflict. But who knows most about the company's real-time performance and the dynamics of its value going forward?
If it's not first the CEO and then the CFO, I don't know who. Yet their lips were apparently sealed. At least so far as guiding shareholders was concerned.
This makes even more critical an accounting for Qantas's utter failure to keep shareholders informed of the company's dramatically improved operating performance through the takeover period.
As discussed last week, chairman Margaret Jackson only grudgingly disclosed in mid-March that 2006-07 profit was likely to be slightly better than the 30-40 per cent increase foreshadowed at the beginning of February with the release of the interim results.
The mid-March update said it would be "towards the upper end of the range". That is actually a very marginal uplift. From "30 to 40 per cent", to "towards the 40 per cent".
In fact the actual increase came in over 60 per cent, a very, very significant uplift. And at no stage, through the offer's close in early May and indeed through the end of the financial year, did Qantas revise its guidance.
Let's throw two other matters into the pot that arise in the Qantas context but have relevance to LBOs (leveraged buyouts) and takeovers generally.
It is suggested that Qantas's advisers, global investment bank UBS and then-boutique investment bank Carnegie Wylie, were to share a $96 million success fee.
For what? A price for Qantas that turned out to be far too low? Or for forcing the bidders to pay an extra 10c per Qantas share in the negotiating phase?
If the latter, getting an extra $200 million for Qantas shareholders got them $96 million. You'd have to say, an extraordinarily generous fee.
I can't assert for certain that sum was correct. But some success fee would have been payable. They always are and $96 million in an $11 billion takeover would not have been out of the ballpark.
It would have been if it was the extra $200 million that got it.
So was the potential fee disclosed in the Qantas target statement? No, they never are. Indeed, there is no reference to any fee being paid to UBS and/or Carnegie Wylie.
Now of course both would have been paid by the bidder -- APA, Airline Partners Australia. The success fee as well as the higher bid price.
And perhaps paid more than happily, if the second suggestion is true. That their working as-is valuation of Qantas was $7 a share as against the $5.45 (actually) offered.
Now I have no doubt that Jackson and her fellow directors thought they were acting in the best interests of shareholders. She was consumed by the fear the share price would plummet if the takeover went away. It of course did, go away, and it didn't, plummet.
Although she might ponder whether the company's previously low share price might have in part been due to Dixon's ceaseless talking down of the airline's supposedly precarious financial position, as an IR bargaining tactic, used especially so successfully in starting Jetstar.
Now Dixon and Gregg are honourable men. As Jackson noted in a special statement in late February, Dixon announced he would gift the entire (up to) $60 million incentive payment to him by the bidding group to a charitable trust.
Springing to his defence is understandable. Less so is that she could find the time to defend her CEO, but not to keep shareholders informed on the company's surging profitability.
Further, if we make the reasonable assumption that Dixon's charitable gift would attract a tax deduction, he might have got $28million back from taxpayers.
Bottom line is one word: transparency. LBOs are part of market practice. We might wish it otherwise. Existing governance structures are inadequate.
Why weren't Dixon and Gregg confined to their "day jobs"? Helping the bidder on behalf of helping shareholders should have been unacceptable.
And why didn't Qantas institutionally bend over backwards to keep shareholders informed on its improving profitability -- something presumably known to senior executives.
More broadly, this whole murky business of "success fees" raises a similar issue. Whom exactly are advisers working for? Again, the starting point is to disclose them and their terms.
ONE of the top Qantas executives, John Borghetti, has come out with an extraordinary and highly troubling statement.
After an American Chamber of Commerce in Australia lunch on Tuesday, executive general manager Borghetti was quoted as saying Qantas CEO Geoff Dixon had been forced to "abandon" his day job while working on the failed takeover bid for the airline.
"Senior management ... (including) Geoff, Peter (Gregg, Qantas CFO), me ... a lot of time was taken up with this thing.
"It went about six months. You couldn't get your job done. You had to sort of abandon it."
Other executives, Borghetti added, "carried the company through" the period.
Now is this the Geoff Dixon who was paid a multi-million dollar salary to run Qantas? Or was this the Dixon who was part of the takeover team trying to buy Qantas at what became clear was a bargain basement price?
Either way there seems to be a difficulty, if what Borghetti was asserting is correct. And it demonstrates the very serious issues raised by these buyouts in which top management participate.
At a very simple level, a shareholder is entitled to presume that executives who are paid big salaries actually "do" their "day jobs".
Now obviously in multi-billion dollar highly complex takeovers, executives -- and especially the CEO and CFO -- are going to be drawn into supplying information, and having discussions with, the bidders.
As they are acting in the best interests of shareholders, that in a sense becomes their "day job". Borghetti's comment would be unremarkable. In an arms' length takeover.
But in this context who are Dixon and Gregg "working for"? In a perfect world, they could work for both. The shareholders and the bidders.
We do not live in a perfect world. Indeed the board of Qantas recognised the (obvious) conflict of interest; and established protocols so that Dixon and Gregg took no part in discussing the bid as directors.
Rather than solve the problem it exacerbated it; and showed all too clearly the unacceptable face of these management-involved buyouts.
First, surely the protocols should have gone deeper. That Dixon and Gregg could not help the bidder in the bidding process; in a real sense, help themselves.
That not only were they handsomely paid to "do their day job" -- run Qantas; but in the context of the takeover that is exactly all they should have done to avoid any conflict.
But secondly and worse, the board "inviting them out" of their two responsibilities as directors and the company's top executives, actually deprived shareholders of their most important resource in the takeover context.
Yes, governance "says" that's how you resolve the conflict. But who knows most about the company's real-time performance and the dynamics of its value going forward?
If it's not first the CEO and then the CFO, I don't know who. Yet their lips were apparently sealed. At least so far as guiding shareholders was concerned.
This makes even more critical an accounting for Qantas's utter failure to keep shareholders informed of the company's dramatically improved operating performance through the takeover period.
As discussed last week, chairman Margaret Jackson only grudgingly disclosed in mid-March that 2006-07 profit was likely to be slightly better than the 30-40 per cent increase foreshadowed at the beginning of February with the release of the interim results.
The mid-March update said it would be "towards the upper end of the range". That is actually a very marginal uplift. From "30 to 40 per cent", to "towards the 40 per cent".
In fact the actual increase came in over 60 per cent, a very, very significant uplift. And at no stage, through the offer's close in early May and indeed through the end of the financial year, did Qantas revise its guidance.
Let's throw two other matters into the pot that arise in the Qantas context but have relevance to LBOs (leveraged buyouts) and takeovers generally.
It is suggested that Qantas's advisers, global investment bank UBS and then-boutique investment bank Carnegie Wylie, were to share a $96 million success fee.
For what? A price for Qantas that turned out to be far too low? Or for forcing the bidders to pay an extra 10c per Qantas share in the negotiating phase?
If the latter, getting an extra $200 million for Qantas shareholders got them $96 million. You'd have to say, an extraordinarily generous fee.
I can't assert for certain that sum was correct. But some success fee would have been payable. They always are and $96 million in an $11 billion takeover would not have been out of the ballpark.
It would have been if it was the extra $200 million that got it.
So was the potential fee disclosed in the Qantas target statement? No, they never are. Indeed, there is no reference to any fee being paid to UBS and/or Carnegie Wylie.
Now of course both would have been paid by the bidder -- APA, Airline Partners Australia. The success fee as well as the higher bid price.
And perhaps paid more than happily, if the second suggestion is true. That their working as-is valuation of Qantas was $7 a share as against the $5.45 (actually) offered.
Now I have no doubt that Jackson and her fellow directors thought they were acting in the best interests of shareholders. She was consumed by the fear the share price would plummet if the takeover went away. It of course did, go away, and it didn't, plummet.
Although she might ponder whether the company's previously low share price might have in part been due to Dixon's ceaseless talking down of the airline's supposedly precarious financial position, as an IR bargaining tactic, used especially so successfully in starting Jetstar.
Now Dixon and Gregg are honourable men. As Jackson noted in a special statement in late February, Dixon announced he would gift the entire (up to) $60 million incentive payment to him by the bidding group to a charitable trust.
Springing to his defence is understandable. Less so is that she could find the time to defend her CEO, but not to keep shareholders informed on the company's surging profitability.
Further, if we make the reasonable assumption that Dixon's charitable gift would attract a tax deduction, he might have got $28million back from taxpayers.
Bottom line is one word: transparency. LBOs are part of market practice. We might wish it otherwise. Existing governance structures are inadequate.
Why weren't Dixon and Gregg confined to their "day jobs"? Helping the bidder on behalf of helping shareholders should have been unacceptable.
And why didn't Qantas institutionally bend over backwards to keep shareholders informed on its improving profitability -- something presumably known to senior executives.
More broadly, this whole murky business of "success fees" raises a similar issue. Whom exactly are advisers working for? Again, the starting point is to disclose them and their terms.
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Bale or Bail?
The Collins Australian Concise Dictionary advises that they're interchangable and the both mean jumping out of a burning aircraft AND assisting a business out of financial difficulties...not a lot of people know that!
Either way, Dixon and Gregg were compromised fatally by their involvement.
Gregg's assertion later that LAME's were making 'a grab for cash' was the subject of bitter hilarity among the QF LAME fraternity
Either way, Dixon and Gregg were compromised fatally by their involvement.
Gregg's assertion later that LAME's were making 'a grab for cash' was the subject of bitter hilarity among the QF LAME fraternity
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The following financial information, which is hot off the street, paints a different picture. Based on this information, Qantas International is doing quite well.
Source: Sydney Investment Bank Note of 2 Jun 11
- International continues to be the stand-out performer – loads in April recovered to be in line with strong trends seen throughout FY11. (The dip in March was due to the Japanese and Christchurch earthquakes)
- International yields are up 8.7% YTD (excl FX).
- Qantas has generated an estimated additional $141m in revenue in April
Source: Sydney Investment Bank Note of 2 Jun 11
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If one does some searching there appear a few names at the end of the money trail.
Leasing companies, private equity firms, consultants, even "disputed" tasman group entities.....
Leasing companies, private equity firms, consultants, even "disputed" tasman group entities.....
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Cha ching
If one does some searching there appear a few names at the end of the money trail.
Leasing companies, private equity firms, consultants, even "disputed" tasman group entities.....
Leasing companies, private equity firms, consultants, even "disputed" tasman group entities.....
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We may run a Voluntary Redundancy Program for Qantas Airlines Cabin Crew (QAL)
____________________________________________________________ ______
We will shortly be sending out communications regarding expressions of interest for a Voluntary Redundancy program that we
may run in both our Domestic and International Qantas Airlines Cabin Crew divisions.
To avoid people that have expressed an interest in knowing the figures from being put on a 'non voluntary redundancy program' list if they reject voluntary I'd suggest the union request all employees are given the figures. Everybody is equal and nobody has had to show their cards.
____________________________________________________________ ______
We will shortly be sending out communications regarding expressions of interest for a Voluntary Redundancy program that we
may run in both our Domestic and International Qantas Airlines Cabin Crew divisions.
To avoid people that have expressed an interest in knowing the figures from being put on a 'non voluntary redundancy program' list if they reject voluntary I'd suggest the union request all employees are given the figures. Everybody is equal and nobody has had to show their cards.
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There is nothing in those points to indicate QF INTL is doing well.
With each of them, ask yourself "relative to what?"
With each of them, ask yourself "relative to what?"
Relative to the CEO harping on about how Qf international is failing and loosing money.
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posted on news.ninemsn.com.au this morning
The announcement came on the same day the airline announced its international unit carried 509,000 passengers in April 2011, up 7.4 per cent from April 2010.
go figure! are jetstar also reducing numbers or still recruiting? Does Jetstar passengers pay a fuel levy?
The announcement came on the same day the airline announced its international unit carried 509,000 passengers in April 2011, up 7.4 per cent from April 2010.
go figure! are jetstar also reducing numbers or still recruiting? Does Jetstar passengers pay a fuel levy?
Memo To Group Management.
By hand, to be opened by the addressee only:
It has come to my attention that some Group Executives are operating under the mistaken impression that short term performance is the determinant of their remuneration rather than adherence to the long term goals of our majority shareholders. The Board therefore wishes to restate the guiding principles that underpin our operations, even at the risk of stating the obvious.
The first principle is that at all times the corporation must ensure that as little as possible information, financial or otherwise, that may hint at the true value, and of course profitability of our operations, is publicly released.
While we are required by continuous disclosures law to provide the markets with material information, the Board makes every effort to ensure that such information as we provide is not only legally correct, but supports our communication strategy. It is difficult enough to reconcile a growth in revenue with an announcement regarding the painful necessity of redundancies, but we have to try.
Our task is not made any easier by Group Executives "high five - ing" each other and congratulating themselves on their monthly profitability in the presence of junior employees. At all times we must maintain a suitably hang dog expression and ensure that an atmosphere of anxiety and depression over the corporate future is maintained. You must always remember that our efforts to outsource, downsize and otherwise break the spirit of our Australian employees will be completely compromised if there is the slightest hint of how profitable and valuable we really are, or even the suggestion that over time we might become profitable.
I do not need to tell you that were Australians in general and shareholders in particular able to understand the full value of this corporation, there would be serious pressure for change at Board level. Group Executives will not be immune from that pressure should it develop. Fortunately for us, there are no financially literate people with the requisite industry experience in Australia in the press, regulators or Government who are able to correctly assess our worth that we do not already control or at least influence. This is why we continue to get away with our little "acceptable return" tag line; "Yes, we are profitable we tell the markets, but the returns aren't acceptable." Nobody can gainsay us.
Be aware however that we cannot rely solely on this lack of expertise to protect us. As the unfortunate failed bid demonstrated, there are enough institutional shareholders already who are deeply suspicious of our motives. We need to tread an exceedingly fine line between disappointing our shareholders and keeping our employees in a permanent state of anxiety about their job security.
I know its difficult, but each piece of good news must be matched by a corresponding negative. Our strategy relies on the corporation being permanently "under threat" to its very existence. Our ability to manipulate our workforce, regulators and the Government relies on this tried and proven totalitarian tactic. To put it another way, there must be no good news, ever!
No executive will ever be penalised for down playing the performance of their operations.
Burn this now.
It has come to my attention that some Group Executives are operating under the mistaken impression that short term performance is the determinant of their remuneration rather than adherence to the long term goals of our majority shareholders. The Board therefore wishes to restate the guiding principles that underpin our operations, even at the risk of stating the obvious.
The first principle is that at all times the corporation must ensure that as little as possible information, financial or otherwise, that may hint at the true value, and of course profitability of our operations, is publicly released.
While we are required by continuous disclosures law to provide the markets with material information, the Board makes every effort to ensure that such information as we provide is not only legally correct, but supports our communication strategy. It is difficult enough to reconcile a growth in revenue with an announcement regarding the painful necessity of redundancies, but we have to try.
Our task is not made any easier by Group Executives "high five - ing" each other and congratulating themselves on their monthly profitability in the presence of junior employees. At all times we must maintain a suitably hang dog expression and ensure that an atmosphere of anxiety and depression over the corporate future is maintained. You must always remember that our efforts to outsource, downsize and otherwise break the spirit of our Australian employees will be completely compromised if there is the slightest hint of how profitable and valuable we really are, or even the suggestion that over time we might become profitable.
I do not need to tell you that were Australians in general and shareholders in particular able to understand the full value of this corporation, there would be serious pressure for change at Board level. Group Executives will not be immune from that pressure should it develop. Fortunately for us, there are no financially literate people with the requisite industry experience in Australia in the press, regulators or Government who are able to correctly assess our worth that we do not already control or at least influence. This is why we continue to get away with our little "acceptable return" tag line; "Yes, we are profitable we tell the markets, but the returns aren't acceptable." Nobody can gainsay us.
Be aware however that we cannot rely solely on this lack of expertise to protect us. As the unfortunate failed bid demonstrated, there are enough institutional shareholders already who are deeply suspicious of our motives. We need to tread an exceedingly fine line between disappointing our shareholders and keeping our employees in a permanent state of anxiety about their job security.
I know its difficult, but each piece of good news must be matched by a corresponding negative. Our strategy relies on the corporation being permanently "under threat" to its very existence. Our ability to manipulate our workforce, regulators and the Government relies on this tried and proven totalitarian tactic. To put it another way, there must be no good news, ever!
No executive will ever be penalised for down playing the performance of their operations.
Burn this now.
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There are two unique aspects of Qantas which define it...
Firstly, it is iconically Australian... It's that little part of this great country that flies around the world and when you step onboard, that welcoming Aussie "G'day" takes you home immediately.
Secondly, it is our safety reputation... So famous, that it even got a mention in a Hollywood movie!
So why is it that those very aspects, which make this Airline great, are being eroded by our Management?
"There are none so blind as those who will not see."
Firstly, it is iconically Australian... It's that little part of this great country that flies around the world and when you step onboard, that welcoming Aussie "G'day" takes you home immediately.
Secondly, it is our safety reputation... So famous, that it even got a mention in a Hollywood movie!
So why is it that those very aspects, which make this Airline great, are being eroded by our Management?
"There are none so blind as those who will not see."