Qantas after the Joyce-Dixon flare up! What’s next?
If the various Qantas stakeholders can filter out the noise generated in parts of the the media by personal aspects of the Joyce-Dixon row there are critical things that must happen if either the current CEO Joyce and his predecessor Dixon is to prevail.
Qantas under Joyce is well into year two of his three to five year plan to turn around the company as a whole and the long haul full service brand in particular. (The plan was first outlined mid 2011 at a National Press Club speech in Canberra but given much more detail in August last year, and the time line has quickly moved to five years, not three-to-five years.)
By the time the FY13 results are declared, investors very clearly want to see a dividend declared as well, and Joyce appears to be moving toward making that easier by having a modest share buy-back program from December, and the early retirement of some debt and the already completed modest sale of some assets.
All good, but perhaps too modest. The tricky bit is that Qantas under Joyce is also conducting the mother of all fare and capacity wars with Virgin Australia, and the history of airline woes in general tells us, whatever we think about the other issues at play within Qantas and the market it operates in, that such fare and capacity wars are exercises in deep self harm.
So the risk of a second financial year of declaring a statutory loss for the group as a whole is self evident, as are very real efforts within Qantas to avoid this potentially negative outcome of a tug-of-war between protecting itself from Virgin Australia and getting its overall performance sufficiently respectable to prevent a dividend payment turning into a further act of self-harm.
While this grim contest occurs between all the players in the airline games in Australia, the risk of the national economy turning south because of various events at home and abroad is reasonable cause for anxiety.
Including for Tourism Australia and tourism activity in Australia, although a broad scale economic disaster will at least fix the exchange rate, but which might end up being the least of anyone’s problems if we were to subscribe to such a gloomy outlook for Australia and the world.
For the Qantas ‘contras’ who want to unlock or pocket the cash reserves, the value of the Jetstar franchise, and the frequent flyer and grocery and petrol buyer ‘loyalty’ program, neither time nor history will be helpful. The history of the original Air Partners Australia bid which was spruiked by Dixon as Qantas CEO at the time, and its motivations and the massive risks for the survival of Qantas that it posed, makes it a rather nasty story no matter how it is spun.
This works very well for Joyce, who on the final day for acceptances of that bid, had forgotten to sign up for it until prompted at the last hour. But it stops working for Joyce when the performance of the carrier under his leadership is studied, together with any graph of the share price movement since he took over, four years ago yesterday, and an ideological dispute with the people that are the Qantas product is reviewed in careful chronological detail.
Whatever the rights and wrongs of those disputes, they could have been addressed sooner, and with less damage to everyone, than they were.
Dixon and the contras do not appear to have the momentum or time needed to dislodge Joyce and crack open the loot until much later in the year, and even if it all turns to a total shambles by then, there are compelling reasons of fairness as to why the Qantas Sale Act should be repealed, and the airline be allowed to gain equality with Virgin Australia when it comes to a structure that makes capital raising easier.
If Joyce were to win that battle it would almost certainly reduce the risks of demands for ‘strategic renewal’ and loot taking in Qantas succeeding. The upside for Qantas such a breakthrough would bring might make the chances of his other strategies actually working look much better than some might think now on the basis that so far nothing has worked.