Bumpy ride the making of Qantas CEO

Alan Joyce, the diminutive Dubliner with the arresting smile, arrived in his dream job as Qantas chief executive in the midst of a nightmare for the airline.

When Joyce took over in November 2008, the purple patch that airlines had enjoyed with the explosion of low-fare routes was fast turning into a sea of red ink, resulting in worldwide losses of billions for the industry in the year just gone.

Qantas was rocked by the resulting turbulence, with profits falling from $970 million in 2007-08 to $123 million last financial year. It slipped into a $93 million loss in the second half, and shareholders missed out on their accustomed final dividend. But unlike many of its rivals, Qantas stayed in the black overall.

Keeping things on track was no cakewalk; 1750 jobs were cut, costs were slashed and $7.9 billion in aircraft acquisitions were deferred or abandoned. Then $500 million was raised from institutional investors at $1.85 a share - 17 per cent below market price and well shy of the $5-plus levels seen before the global financial crisis.

'' A lot of people left the organisation that we knew personally and it wasn't a case of people not doing a good job. But [we went] through a period of having to protect the company and the vast majority of employees. When 35,000 people depend on your decisions, you know you have to do it for the good of all employees, but no one wants to do it,'' Joyce says.

There were also a spate of incidents that cast doubt on Qantas' impeccable safety reputation. In one of these, 40 people were injured, 15 seriously, in October 2008, when a plane suddenly lost altitude en route from Singapore to Perth; and in July the same year a Manila-bound 767 was forced to dump fuel and return to Sydney after a hydraulic failure. While Joyce says initial investigations have revealed no shortcomings in Qantas' procedures, final reports are yet to be received.

The airline industry has always been tough but, according to Joyce, it's getting tougher. ''The cycles are getting more pronounced, the troughs and peaks are bigger. As [his predecessor] Geoff Dixon said, 'it is exposed more to constant shock syndrome more than any other business out there'.''

Dixon was a big influence on Joyce, who in some ways is Dixon's creation. Dixon's decision to launch Jetstar in 2004 allowed both Joyce (as Jetstar's CEO) and his low-cost start-up to flourish to the point that the minnow, on revenue of $1.8 billion and 3000 employees, earned $126 million before interest and tax last year. Qantas, with $11.7 billion in revenue and 27,600 workers, lost $77 million on the EBIT line. Not only that, but the little man from the small airline now runs the whole show. Management heavy-hitters from the past like Peter Gregg and John Borghetti are gone and Joyce has installed his own team.

Dixon and Joyce differ in style and temperament. Joyce has a background in maths and analysis while his predecessor was a marketing guru. While ''Dicko'' was partial to a stoush with unions, Joyce talks to people. Although he's keen to show he's no pushover, with an enterprise bargaining agreement covering 10,000 workers up for renegotiation later this year.

''The airline can only afford what it can. We have to have a sensible approach to wage negotiations and the vast majority of employees understand that.''

Joyce argues that the thing that saved Qantas from the global financial crisis was the diversity that Jetstar provided, and he plans to build on it. ''I believe we're in one of the best positions of any airline in the world. We have a portfolio of assets … both full service and

low-cost operations, domestic and international, regional, a freight business and frequent flyers. That gives us unique strength.''

Jetstar grew through the financial crisis and a recent tie-up with Air Asia will, Joyce believes, yield further benefits, in part because they are the region's two largest low-cost operators. The new Jetstar hub in Singapore will allow the airline to boost long-haul flights into southern Europe. China is on the radar, with both Jetstar and Qantas flying there.

The naysayers see Joyce as too focused on the low-cost model which they claim is only suited for short runs less than five hours. Joyce disagrees: ''The [low-cost model] is very similar to economy class on a full-service airline, except you choose what you pay for. Jetstar already flies Sydney to Honolulu [10 hours], which is longer than Singapore-southern Europe, and it has strong demand.''

However, Joyce is not walking away from full-service operations. ''We plan to grow both the full-service and low-cost segments. I'm a strong believer that the premium market is not dead. Two years ago commentators were saying the low-cost market couldn't cope with high fuel prices. Thank God we didn't listen to them, as Jetstar is making great profits. Last year we [committed to] six Airbus A380's each worth $300 million; that's a huge investment in the premium segment.''

Alan Joyce, 43, didn't set out to be in the airline game. Initially it was simply a way to use his maths qualifications. ''I got a job at [Irish airline] Aer Lingus and got the smell of jet kerosene in me and never wanted to leave. While we have challenges there is no other business like it. It's very complex and that makes it very interesting. You get addicted; I'm not sure I could feel the same excitement about building widgets or being in the banking industry looking at deposits every day. ''

As for the immediate future, Joyce says recovery is under way. He has predicted a positive first half of between $50 million and $150 million, with Jetstar and Qantas domestic operations performing better. But he says international operations continue to lag and will depend on the strength of European and North American economies.

CV

BORN Dublin, Ireland

EDUCATION

■Bachelor of science in applied science (physics and mathematics) (honours).

■Master of science in management science - Trinity College Dublin.

■Fellow of the Royal Aeronautical Society.

CAREER HIGHLIGHTS

■Qantas CEO since November 2008.

■2003-2008 Jetstar CEO.

■1996-2003 Qantas and Ansett - various schedule and network planning executive positions.

■1988-1996 Aer Lingus - several roles in sales, marketing, IT, network planning, operations research, revenue management and fleet planning.

INTERESTS Mathematics, following soccer and AFL.

THE HARD QUESTIONS

How do you feel about the failed 2007 privatisation bid for Qantas, in which you were to be a participant? In hindsight, you'd say thank God it didn't happen, but the world did change. Before the GFC people thought Qantas had a lazy balance sheet and it should be more leveraged. That was wrong, but the whole business community was looking at how you could leverage and debt was very cheap.

What are you proudest of in the past 15 months? The rapid way the organisation responded to the GFC. We acted to improve liquidity raising $500 million in equity and secured over $1 billion in aircraft funding when the markets were pretty tight.

Any mistakes? With hindsight we probably shouldn't have been so aggressive with (cutting) air fares last April.