Joyce ‘retires’ early 👍
From Financial Times, reprinted in the NZ Herald
Business Australia falls out of love with Qantas
In the past three months, Qantas has been found guilty of illegally sacking 1,700 workers, been accused of offering “ghost flights” to its customers and lost 20 per cent of its stock market value. So when investors were asked at the airline’s annual meeting on Friday whether they would back a pay package for its executives, the result was a resounding no. In a snub to Australia’s flag carrier, 83 per cent of shareholders voted against the proposal.
The fiery meeting at the Melbourne Convention and Exhibition Centre has underlined the immensity of the task facing the new board and management team at Qantas to restore its reputation. Andrew Charlton, a former Qantas executive and managing director of consultancy Aviation Advocacy, said Australians used to be proud of Qantas. “If you take that loyalty for granted...that starts to chip away. The seemingly ceaseless scandals and service lapses mean that now, Qantas has even lost Australia,” said Charlton.
The carrier, known as the “Flying Kangaroo”, fell out of favour with unions, regulators, customers and now shareholders during the 15-year tenure of Alan Joyce, who stepped down early two months ago. Joyce’s steely focus on the carrier’s balance sheet meant that the airline exited the pandemic in good financial health, with Qantas chair Richard Goyder praising the former chief for navigating the company through “the most challenging and tumultuous period in the airline’s history” in May.
In August, Qantas reported a A$2.5b ($2.7b) underlying pre-tax profit for the year ending in June and announced a A$500mn share buyback to reward shareholders for their support. However customers were fed up with lost bags and cancelled flights as a result of costcutting measures introduced by Joyce who was lambasted aer describing travellers as “not match fit” last year when there were long queues at airports. He later clarified: “The simple fact is our operational performance hasn’t been up to the standard.”
It is now shareholders who have turned on Qantas as the company has been hit by a series of scandals. The consumer regulator sued the airline in August, accusing it of charging for ghost flights, selling thousands of tickets for flights that had already been cancelled. Shareholders criticised the ghost flights defence offered by the airline, namely its argument that it does not sell a ticket when the customer books a flight but a “bundle of rights”.
Earlier in September, a court ruled that Qantas had illegally sacked 1,700 workers during the pandemic, leaving it facing a mammoth compensation bill. Goyder, who alongside two long-serving board members is standing down this year, described the annual meeting vote as “overwhelming”. “We hear the message,” he said as investors lined up at the meeting to take potshots at the company. One investor demanded to know if any of the people on stage had travelled economy class on an international Qantas flight in the past year.
Stephen Mayne, a Qantas shareholder and activist investor, said shareholders had been the “bedrock” of support during the Joyce era but the company had now lost that constituency too. “Shareholders were the last to fold, but collectively they are now quite feral and seeking restitution,” he said.
Rachel Waterhouse, chief executive of the Australian Shareholders’ Association, a retailinvestor body, said shareholders were “very disappointed” with Qantas and needed to hear how the company would get back on track. That task has fallen to new chief executive Vanessa Hudson, who has been with the airline for almost three decades and replaced Joyce.
In response to aggrieved shareholders, Hudson said the “customer is now our number one focus” and detailed various plans to refund customers, improve training for staff and improve the standard of food on its long-haul flights. The damage done to the Qantas brand was evident at the annual meeting when a third of investors voted against the re-election of Todd Sampson, a former advertising executive. Sampson said he had considered standing down but felt his experience rebuilding brands should come to the fore now. “Our brand and reputation have suffered considerable damage, damage we will repair,” he told shareholders.
The job for Hudson and a new chair and board will be a rapid restoration of the airline’s reputation. They will at least do so from a position of financial strength — with Qantas’s balance sheet bolstered by debt reduction and cost-cutting under Joyce — and in a domestic market where it still commands a market share of more than 60 per cent. If they fail to turn it around within a year, then they risk further turbulence at next year’s meeting.
Australia’s “two strikes” law dictates that investors could push to dissolve the board after a second vote against the company’s executive pay proposal. Mayne said he was hopeful that Qantas could overcome the turmoil, especially now that Joyce and Goyder had moved on. Investors feel they have had enough “red meat” for now, he said.
Written by: Nic Fildes in Sydney © Financial Times
Business Australia falls out of love with Qantas
In the past three months, Qantas has been found guilty of illegally sacking 1,700 workers, been accused of offering “ghost flights” to its customers and lost 20 per cent of its stock market value. So when investors were asked at the airline’s annual meeting on Friday whether they would back a pay package for its executives, the result was a resounding no. In a snub to Australia’s flag carrier, 83 per cent of shareholders voted against the proposal.
The fiery meeting at the Melbourne Convention and Exhibition Centre has underlined the immensity of the task facing the new board and management team at Qantas to restore its reputation. Andrew Charlton, a former Qantas executive and managing director of consultancy Aviation Advocacy, said Australians used to be proud of Qantas. “If you take that loyalty for granted...that starts to chip away. The seemingly ceaseless scandals and service lapses mean that now, Qantas has even lost Australia,” said Charlton.
The carrier, known as the “Flying Kangaroo”, fell out of favour with unions, regulators, customers and now shareholders during the 15-year tenure of Alan Joyce, who stepped down early two months ago. Joyce’s steely focus on the carrier’s balance sheet meant that the airline exited the pandemic in good financial health, with Qantas chair Richard Goyder praising the former chief for navigating the company through “the most challenging and tumultuous period in the airline’s history” in May.
In August, Qantas reported a A$2.5b ($2.7b) underlying pre-tax profit for the year ending in June and announced a A$500mn share buyback to reward shareholders for their support. However customers were fed up with lost bags and cancelled flights as a result of costcutting measures introduced by Joyce who was lambasted aer describing travellers as “not match fit” last year when there were long queues at airports. He later clarified: “The simple fact is our operational performance hasn’t been up to the standard.”
It is now shareholders who have turned on Qantas as the company has been hit by a series of scandals. The consumer regulator sued the airline in August, accusing it of charging for ghost flights, selling thousands of tickets for flights that had already been cancelled. Shareholders criticised the ghost flights defence offered by the airline, namely its argument that it does not sell a ticket when the customer books a flight but a “bundle of rights”.
Earlier in September, a court ruled that Qantas had illegally sacked 1,700 workers during the pandemic, leaving it facing a mammoth compensation bill. Goyder, who alongside two long-serving board members is standing down this year, described the annual meeting vote as “overwhelming”. “We hear the message,” he said as investors lined up at the meeting to take potshots at the company. One investor demanded to know if any of the people on stage had travelled economy class on an international Qantas flight in the past year.
Stephen Mayne, a Qantas shareholder and activist investor, said shareholders had been the “bedrock” of support during the Joyce era but the company had now lost that constituency too. “Shareholders were the last to fold, but collectively they are now quite feral and seeking restitution,” he said.
Rachel Waterhouse, chief executive of the Australian Shareholders’ Association, a retailinvestor body, said shareholders were “very disappointed” with Qantas and needed to hear how the company would get back on track. That task has fallen to new chief executive Vanessa Hudson, who has been with the airline for almost three decades and replaced Joyce.
In response to aggrieved shareholders, Hudson said the “customer is now our number one focus” and detailed various plans to refund customers, improve training for staff and improve the standard of food on its long-haul flights. The damage done to the Qantas brand was evident at the annual meeting when a third of investors voted against the re-election of Todd Sampson, a former advertising executive. Sampson said he had considered standing down but felt his experience rebuilding brands should come to the fore now. “Our brand and reputation have suffered considerable damage, damage we will repair,” he told shareholders.
The job for Hudson and a new chair and board will be a rapid restoration of the airline’s reputation. They will at least do so from a position of financial strength — with Qantas’s balance sheet bolstered by debt reduction and cost-cutting under Joyce — and in a domestic market where it still commands a market share of more than 60 per cent. If they fail to turn it around within a year, then they risk further turbulence at next year’s meeting.
Australia’s “two strikes” law dictates that investors could push to dissolve the board after a second vote against the company’s executive pay proposal. Mayne said he was hopeful that Qantas could overcome the turmoil, especially now that Joyce and Goyder had moved on. Investors feel they have had enough “red meat” for now, he said.
Written by: Nic Fildes in Sydney © Financial Times
One wonders if the reason for Goyders timing of “before the next AGM” for his exit, is because he thinks there’s a good chance of the board being dissolved, and he doesn’t want to be a part of that. 
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Despite all the "wind and fury", the customers are not taking their business elsewhere, and the shareholders en masse are not selling their shares in disgust. Their "moral outrage" is just that. "I'm disgusted (until I actually have to do something concrete to demonstrate it)". Underneath, it's business as usual.
It'd be a pretty safe bet that the investors who actually turn up at a QF AGM hadn't either.
One investor demanded to know if any of the people on stage had travelled economy class on an international Qantas flight in the past year.
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Despite all the "wind and fury", the customers are not taking their business elsewhere, and the shareholders en masse are not selling their shares in disgust. Their "moral outrage" is just that. "I'm disgusted (until I actually have to do something concrete to demonstrate it)". Underneath, it's business as usual.
The damage done to the Qantas brand was evident at the annual meeting when a third of investors voted against the re-election of Todd Sampson
OK I'll state it. Staff have known for at least ten years, but this is the moment that Qantas has become merely a 'brand' instead of an 'icon'. As all staff knew, decades of trust were being thrown away. Now it's happened. Well done Strong, Dixon, Elaine. and Elaine with wig. The rorts are over - now you have to 'mark to market' and compete without the brand distinction you plundered. As I'm sure everyone is - I'm appalled. And Elaine with wig - I hope you reap a lot of pain from this because your ilk created the crisis.
Rather than Elaine with wig - i'm more comfortable with Elaine's wig.
Rather than Elaine with wig - i'm more comfortable with Elaine's wig.
Last edited by V-Jet; 5th Nov 2023 at 08:40. Reason: Rather than 'Elaine with wig' - i'm more comfortable with 'Elaine's wig'
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Opinion
Ayesha de KretserSenior reporterNov 5, 2023 – 5.30pm
A Qantas customer booked flights from Sydney to Tamworth to attend a Nick Cave concert. On the morning of the event, Qantas cancelled a flight due to arrive at 1.30pm and rescheduled her onto a new one, arriving at 9.30pm.
Left with the choice of missing the show or accepting a flight credit, she opted for the latter and suffered the loss on the $289 show.
Qantas chairman Richard Goyder and CEO Vanessa Hudson at the company’s AGM in Melbourne on Friday. Joe Armao When the customer tried to apply the credit for flights from Sydney to Cairns, she couldn’t book the cheapest “red e-deal” seats available online, even though that was the equivalent fare she booked to Tamworth.
A call to Qantas revealed her original booking class (an alphabetical letter that categorises the ticket within a fare category) was different, so she would need to stump up $200 extra per seat.
Having in effect burnt $449 on flights and concert tickets, on top of the original $945 reissued as credit, she joins the disenchanted Qantas customers who are watching the ACCC’s case eagerly.
Will the Federal Court agree with Qantas, that when we book a trip we’re simply buying a “bundle of rights” or a vague promise to get somewhere, sometime?
The customer’s experience shows ordinary travellers don’t realise they’re buying variable booking classes within a fare. But for airlines, the booking class is crucial to revenue management and undermines the legal argument Qantas is relying on.
“The industry sells a time-definite product, rather than a time-indefinite product, so I don’t see the point regarding the obligation to simply transport you from A to B within a reasonable timeframe as fully accurate,” says Air Control Tower managing director Neil Glynn, an industry analyst.
“Once the 9am flight departs, all unsold inventory expires, but the cost of the flight doesn’t change significantly whether there were 100 or 150 passengers on it, so the time-definite nature of the product is a cornerstone of revenue management strategies.”
And even if customers more broadly were to accept – as Qantas is at pains to argue – that there are no guarantees around timeliness, they expect their rights as consumers will kick in when there are inevitable delays. (What constitutes an “inevitable” delay is still up for debate in Australia.)
The ACCC has been pressing Transport Minister Catherine King to use her white paper to embed similar regulations as those in Europe, where passengers are compensated for delays. By taking on the ACCC in arguing passengers have no right to expect their flight to take off on time, Qantas is goading an already motivated regulator to make further, far more costly changes.
“In Europe, EU261 stipulates that passengers have the right to claim compensation should a flight be delayed three hours or more (unless due to exceptional circumstances), which is legal context for the time-definite point in Europe,” Glynn explains.
If the worst case is realised and compensation is legislated, Qantas admits it will just pass the cost of compensation onto customers in the form of higher airfares. This again undermines chief executive Vanessa Hudson’s lofty promise to “restore the balance” for customers.
Qantas says the ACCC’s case unfairly paints the airline as the villain, and it would have been surprised by the fact that all domestic customers with a cancelled flight got put on another within an hour of their booking. Further, 98 per cent of international travellers were rebooked (or offered flights) within 24 hours of their original booking, on average, two months out from their departure.
With plenty of time to shuffle, Qantas contends that no harm was done.
The airline’s defence flails when it comes to continuing to sell the flights – for an average of 16 days – after they had been cancelled.
Virgin Australia, like Qantas, does not guarantee your flight will take off or arrive on time. But unlike Qantas, Virgin says it has to have a “reasonable basis” to believe it can operate the flights it puts up for sale to comply with section 36 of Australian consumer law.
Qantas does not say anything about having a reasonable basis for the flight being marketed, only that it will get you there within a reasonable time. (Of course, if a passenger doesn’t show up on time, the “bundle of rights” idea quickly loses currency.)
And while Qantas is adamant it did not do any of this for commercial benefit, it undoubtedly raised and held on to revenue by choosing not to follow the lead of other airlines that simply refunded customers’ money.
Qantas argues it was doing its customers a favour by going out of its way to find them new flights, while saving the already stressed call centres from being inundated.
This ignores the fact Qantas customers may have chosen to rebook their flights on a different airline, like the concertgoer might have done if she’d been given a refund.
Inconvenience to the consumer or lost revenue for airlines make up only one part of what is riding on the ACCC’s case.
If the court rules Qantas is selling a bundle of rights to get where we want to go, but not on time, what will it cost the Australian economy? Will travellers withhold spending if there is no obligation from a service provider to get them there?
The productivity challenges wrapped up in the inefficient operations of Sydney Airport are front and centre in former Productivity Commission boss Peter Harris’s slot review. The ACCC contends that at least in part, Qantas kept the flights on sale to maintain those slots. Qantas refutes the claim because there were pandemic-era waivers in place during the time in question.
An unreliable and monopolised network has the effect of deterring travel – whether from regional Australia, where the cost becomes prohibitive, or from inbound tourists who Qantas has in effect prevented from spending money here by lobbying for protection from competition.
Qantas has been steadily resetting the bar lower when it comes to its on-time performance, cancellations (still 50 per cent higher than pre-pandemic levels), and the quality of food and cleanliness on board.
But a ruling that consumers don’t have a right to get where they want to go on time would have a ripple effect on traveller behaviour.
Some business travel will cease. Even leisure travellers, who until now have been both cashed up by pandemic-era stimulus and desperate to make up for lost holidays, will think twice about their next trip, more so if the economy enters a sharper slowdown.
Teal independent Monique Ryan has taken up the ACCC’s case and is also pressuring the government to institute a European-style compensation system, while Senator David Pocock has successfully lobbied to reinstate the ACCC’s airline monitoring.
Australians will lose if Qantas wins against the ACCC
A win for the airline would only serve to reset the bar for air travel even lower, with dreadful ramifications for productivity.Ayesha de KretserSenior reporterNov 5, 2023 – 5.30pm
A Qantas customer booked flights from Sydney to Tamworth to attend a Nick Cave concert. On the morning of the event, Qantas cancelled a flight due to arrive at 1.30pm and rescheduled her onto a new one, arriving at 9.30pm.
Left with the choice of missing the show or accepting a flight credit, she opted for the latter and suffered the loss on the $289 show.
Qantas chairman Richard Goyder and CEO Vanessa Hudson at the company’s AGM in Melbourne on Friday. Joe Armao When the customer tried to apply the credit for flights from Sydney to Cairns, she couldn’t book the cheapest “red e-deal” seats available online, even though that was the equivalent fare she booked to Tamworth.A call to Qantas revealed her original booking class (an alphabetical letter that categorises the ticket within a fare category) was different, so she would need to stump up $200 extra per seat.
Having in effect burnt $449 on flights and concert tickets, on top of the original $945 reissued as credit, she joins the disenchanted Qantas customers who are watching the ACCC’s case eagerly.
Will the Federal Court agree with Qantas, that when we book a trip we’re simply buying a “bundle of rights” or a vague promise to get somewhere, sometime?
The customer’s experience shows ordinary travellers don’t realise they’re buying variable booking classes within a fare. But for airlines, the booking class is crucial to revenue management and undermines the legal argument Qantas is relying on.
“The industry sells a time-definite product, rather than a time-indefinite product, so I don’t see the point regarding the obligation to simply transport you from A to B within a reasonable timeframe as fully accurate,” says Air Control Tower managing director Neil Glynn, an industry analyst.
“Once the 9am flight departs, all unsold inventory expires, but the cost of the flight doesn’t change significantly whether there were 100 or 150 passengers on it, so the time-definite nature of the product is a cornerstone of revenue management strategies.”
And even if customers more broadly were to accept – as Qantas is at pains to argue – that there are no guarantees around timeliness, they expect their rights as consumers will kick in when there are inevitable delays. (What constitutes an “inevitable” delay is still up for debate in Australia.)
The ACCC has been pressing Transport Minister Catherine King to use her white paper to embed similar regulations as those in Europe, where passengers are compensated for delays. By taking on the ACCC in arguing passengers have no right to expect their flight to take off on time, Qantas is goading an already motivated regulator to make further, far more costly changes.
“In Europe, EU261 stipulates that passengers have the right to claim compensation should a flight be delayed three hours or more (unless due to exceptional circumstances), which is legal context for the time-definite point in Europe,” Glynn explains.
If the worst case is realised and compensation is legislated, Qantas admits it will just pass the cost of compensation onto customers in the form of higher airfares. This again undermines chief executive Vanessa Hudson’s lofty promise to “restore the balance” for customers.
Qantas says the ACCC’s case unfairly paints the airline as the villain, and it would have been surprised by the fact that all domestic customers with a cancelled flight got put on another within an hour of their booking. Further, 98 per cent of international travellers were rebooked (or offered flights) within 24 hours of their original booking, on average, two months out from their departure.
With plenty of time to shuffle, Qantas contends that no harm was done.
The airline’s defence flails when it comes to continuing to sell the flights – for an average of 16 days – after they had been cancelled.
Virgin Australia, like Qantas, does not guarantee your flight will take off or arrive on time. But unlike Qantas, Virgin says it has to have a “reasonable basis” to believe it can operate the flights it puts up for sale to comply with section 36 of Australian consumer law.
Qantas does not say anything about having a reasonable basis for the flight being marketed, only that it will get you there within a reasonable time. (Of course, if a passenger doesn’t show up on time, the “bundle of rights” idea quickly loses currency.)
And while Qantas is adamant it did not do any of this for commercial benefit, it undoubtedly raised and held on to revenue by choosing not to follow the lead of other airlines that simply refunded customers’ money.
Qantas argues it was doing its customers a favour by going out of its way to find them new flights, while saving the already stressed call centres from being inundated.
This ignores the fact Qantas customers may have chosen to rebook their flights on a different airline, like the concertgoer might have done if she’d been given a refund.
Inconvenience to the consumer or lost revenue for airlines make up only one part of what is riding on the ACCC’s case.
If the court rules Qantas is selling a bundle of rights to get where we want to go, but not on time, what will it cost the Australian economy? Will travellers withhold spending if there is no obligation from a service provider to get them there?
The productivity challenges wrapped up in the inefficient operations of Sydney Airport are front and centre in former Productivity Commission boss Peter Harris’s slot review. The ACCC contends that at least in part, Qantas kept the flights on sale to maintain those slots. Qantas refutes the claim because there were pandemic-era waivers in place during the time in question.
An unreliable and monopolised network has the effect of deterring travel – whether from regional Australia, where the cost becomes prohibitive, or from inbound tourists who Qantas has in effect prevented from spending money here by lobbying for protection from competition.
Qantas has been steadily resetting the bar lower when it comes to its on-time performance, cancellations (still 50 per cent higher than pre-pandemic levels), and the quality of food and cleanliness on board.
But a ruling that consumers don’t have a right to get where they want to go on time would have a ripple effect on traveller behaviour.
Some business travel will cease. Even leisure travellers, who until now have been both cashed up by pandemic-era stimulus and desperate to make up for lost holidays, will think twice about their next trip, more so if the economy enters a sharper slowdown.
Teal independent Monique Ryan has taken up the ACCC’s case and is also pressuring the government to institute a European-style compensation system, while Senator David Pocock has successfully lobbied to reinstate the ACCC’s airline monitoring.
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So two thirds didn't think the damage was that bad? Or did they think that the guy getting paid to oversee the brand's well being, and who completely let the destruction through to the keeper, is the best guy to now repair it? Wow, talk about engineering a job for life!
I'd say the big shareholders were happy enough with Goyder, Hey and Brenner going that Sampson could stay. No idea why, he's brought exactly zero to the board and company.
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And even if customers more broadly were to accept – as Qantas is at pains to argue – that there are no guarantees around timeliness, they expect their rights as consumers will kick in when there are inevitable delays. (What constitutes an “inevitable” delay is still up for debate in Australia.)
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Delays and cancellations are and have always been a part of airline operations.
Completely different kettle of fish to a cancellation because the the aircraft went US or the crew called in sick.
There’s a better way to cut the Gordian Knot here than a “European-style compensation system”: Any ‘up front’ payments for airfares go into a trust fund that is not accessible to or controlled by the airlines or anyone connected with the airlines.
20% of the airfare is released to the airline when the passenger boards the aircraft for the booked flight – or an alternative, only if agreed by the passenger - and the other 80% is released to the airline if and when the passenger reaches their destination with their baggage (if any). Any flight cancellation or delay longer than a specified period results in the passenger having the right to elect to take a full refund, and the trustee is obliged to pay the refund. If the passenger fails to front for a flight, the airline is entitled to 100% of the payment, unless the airline agrees to a lesser amount, in which case the balance is refunded to the customer. If the passenger cancels with less than a specified period of notice, the airline gets 50%. (Do what you will with the percentages, provided that the outcome incentivises the provision of the service for which the customer originally paid.) The airline would have security, in the sense that it would know that the money is there and will be paid on the provision of the service. The airline would have a ‘bundle of rights’, if you will... But the rights don’t include the airline getting its grubby fingers on the customers’ money unless until the service for which the customer paid is provided.
Qantas did what it was financially incentivised to do: Gather and retain as much money up front from customers as quickly and efficiently as it could, then make it far more inconvenient for the customers to get their money back than accept whatever poor service Qantas ‘managed’ to cobble together as the alternative for what was booked. That behaviour would change, in the blink of an eye, if Qantas wasn’t allowed to take customers' money in advance of the provision of the service. Doesn’t need the ACCC to do anything.
(My presumptive position is that any business which insists on money ‘up front’ for yet-to-be provided goods or services is probably dodgy anyway.)
I’m prepared to set up and administer the system for the (very modest) fee of 0.005% of each payment into the fund and of each payment out of the fund.
20% of the airfare is released to the airline when the passenger boards the aircraft for the booked flight – or an alternative, only if agreed by the passenger - and the other 80% is released to the airline if and when the passenger reaches their destination with their baggage (if any). Any flight cancellation or delay longer than a specified period results in the passenger having the right to elect to take a full refund, and the trustee is obliged to pay the refund. If the passenger fails to front for a flight, the airline is entitled to 100% of the payment, unless the airline agrees to a lesser amount, in which case the balance is refunded to the customer. If the passenger cancels with less than a specified period of notice, the airline gets 50%. (Do what you will with the percentages, provided that the outcome incentivises the provision of the service for which the customer originally paid.) The airline would have security, in the sense that it would know that the money is there and will be paid on the provision of the service. The airline would have a ‘bundle of rights’, if you will... But the rights don’t include the airline getting its grubby fingers on the customers’ money unless until the service for which the customer paid is provided.
Qantas did what it was financially incentivised to do: Gather and retain as much money up front from customers as quickly and efficiently as it could, then make it far more inconvenient for the customers to get their money back than accept whatever poor service Qantas ‘managed’ to cobble together as the alternative for what was booked. That behaviour would change, in the blink of an eye, if Qantas wasn’t allowed to take customers' money in advance of the provision of the service. Doesn’t need the ACCC to do anything.
(My presumptive position is that any business which insists on money ‘up front’ for yet-to-be provided goods or services is probably dodgy anyway.)
I’m prepared to set up and administer the system for the (very modest) fee of 0.005% of each payment into the fund and of each payment out of the fund.
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(My presumptive position is that any business which insists on money ‘up front’ for yet-to-be provided goods or services is probably dodgy anyway.)
Have a read of the article above. Ghost flights are an issue, but the general lack of reliability and the way passengers are ‘handled’ during a cancellation is very much a part of the issue before the ACCC.
By ROBERT GOTTLIEBSEN
- 10:46AM NOVEMBER 6, 2023
On September 4, I described Qantas as the worst failure of board governance since AMP and called on the chairman Richard Goyder and then chief executive Alan Joyce to resign.
Joyce did the right thing and later that day brought forward his retirement and resigned. But the chairman, encouraged by foolish institutions, did not announce his intention to resign.
The young institutional managers had not studied history and did not realise that when a company gets into trouble, it is extremely difficult for the board that delivered the crisis to solve it. Often they make the situation worse and, sadly, that is what happened to Qantas.
The institutions now appear to realise their mistake and Goyder has responded by agreeing to step down in a few months, which is what he should have announced on September 4.
Qantas chair Richard Goyder and CEO Vanessa Hudson during the airline’s heated annual shareholder meeting in Melbourne. Picture: Luis Ascui/NCA NewsWire At that time, there were almost certainly a number of top people available and willing to take the chair of Qantas. Now a top person may be harder to find. BHP chairman Ken MacKenzie was tipped as a possible Qantas chair, but not too subtly last week ruled himself out by extending his planned term at BHP.None of the above is a criticism of the Qantas staff or of the directors personally. It is a criticism of the institutions who should have known better.
These are strong statements and many readers will disagree, so let me explain why I believe a well-meaning board made the Qantas situation much worse:
• As a solvent company, Qantas is unique in Australia because it has $20bn of assets but shareholders funds of only $10m. The company is able to trade because its loyal customers as at June 30 had spent $5bn buying what they called “tickets” in advance expecting to fly in the next 12 months on specified dates.
There was a further $1.3bn in unredeemed frequent flyer revenue. With smaller items, revenue received in advance totalled $8.7bn. This is a regular situation, so it has become effectively the Qantas “capital”.
• But it is fickle capital and can be slashed if there is a major aviation downturn or a substantial fall in the market share of Qantas. That’s why the decline in the value of the Qantas brand in the months leading up to September 4 was so serious.
• In 2022-23, Qantas was a cash generating powerhouse and, in my view, the board should have used those strong profits to issue shares to lessen the risks in Qantas by backing it with genuine shareholders funds. Instead of issuing shares they began buying back shares and that buyback coincided with Alan Joyce selling his shares at $6.75 a share, yielding him $17m. The shares later fell below $5.
• On August 31, ACCC chair Gina Cass-Gottlieb launched an action in the Federal Court alleging Qantas engaged in “false, misleading or deceptive conduct” by advertising tickets for more than 8,000 flights that it had already cancelled but not removed from sale. It offered Qantas directors the opportunity to settle by paying $250m.
The board should have quickly grabbed the opportunity and might have even been able to negotiate it down a little.
Qantas is being taken to court by the nation’s competition watchdog for advertising tickets for more than 8,000 flights that it had already cancelled. Picture: David Gray/AFP • Instead, the Qantas board decided to take on Cass-Gottlieb in court using a highly legalistic defence that could be legally correct but represents an enormous risk to the Qantas customer goodwill and therefore the capital base of the company. And the board continued to buy back shares.• The Qantas customers who outlaid $5bn at June 30 believed they were buying a ticket for a particular flight to a particular destination at a particular time. The Qantas base defence is that what their customers were actually buying was a “service” which was really a bundle of contractual rights that obliged the airline to do its best to get customers where they want to be on time.
The Federal Court will decide whether Qantas is right or wrong in its definition of what their customers were buying.
But in the daily public court hearings Qantas customers will be horrified at this definition and the lawyers for the ACCC will mercilessly rub the Qantas nose deep into the public dirt as they claim that the Qantas definition of what they were selling represented “false, misleading or deceptive conduct”.
• Meanwhile, the delighted Virgin camp has seen the Morgan polling that shows their brand now has a higher standing than Qantas. They will be marketing to angry Qantas customers, pointing out if they shift to Virgin they can get a genuine “ticket” on a non-cancelled flight. Later, depending on government approval, that marketing may be extended to more flights on Qatar Airways.
Before the 2002 collapse of Ansett, Qantas had around 50 per cent of the domestic market, but it now has an established a market share of around 61 per cent. (Joyce was aiming at 70 per cent)
If Qantas slumped to 50 per cent market share, it would have too many aircraft and excess staff. Losses would be incurred and shares would need to be issued at lower prices to give the company real shareholders funds.
That’s not a prediction, but it is a danger to be blamed in the institutions for allowing the Qantas chairman and board not be reconstituted after September 4.
The grim photos of new CEO Vanessa Hudson at last week’s annual meeting indicate that she understands what could be ahead. Yet had the board reconstruction process been started on September 4, an incoming chairman would have forced a different stance in the ACCC case and could have boosted Hudson at the annual meeting.
Qantas CEO Vanessa Hudson at the airline’s annual shareholder meeting in Melbourne. Picture: Luis Ascui/NCA NewsWire That’s what happened at the CBA when Catherine Livingstone became chairman and supported then new CEO Matt Comyn even though he had been an executive when CBA mistakes were made. Comyn and Livingstone were a great team. Unfairly, Hudson may not get the opportunity to be a Comyn.
Goodwill.
Man Bilong Balus long PNG
Join Date: Apr 2002
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Goodwill.
I'm not arguing with you, Pinky. I was just speculating about what value of what Qantas assets were being plucked out of whose arse to produce $20billion. "Goodwill" is one of those wonderful accounting tools that are meaningless until the business is sold.