Clipping the wings of the flailing kangaroo: Qantas posts record $2.8 billion loss, CEO Alan Joyce blames external forces
ALAN Joyce has piloted Qantas to a record loss, and now questions are being asked whether he should press the ejector seat.
Travel
Don't miss out on the headlines from Travel. Followed categories will be added to My News.
ALAN Joyce has capped off five years of hell at the helm of Qantas to announce a record $2.8 billion loss.
The horror result reflected the cost of a bloody capacity war with competitor Virgin, the deepening losses of its international arm and the plunging value of its aircraft.
Yet in the sea of red ink, the market applauded — pushing the share price almost 9 per cent by lunch ahead of closing up 9c to $1.38.
ALAN JOYCE SAYS: UP, UP AND AWAY WITH THE NEW QANTAS
And Mr Joyce was defiant in the face of the headline loss, deflecting blame for the airline’s troubles to external forces like fuel costs and promising to deliver a profit next time. “There’s no doubt that today’s numbers are confronting,” he said.
Mr Joyce made it clear the result had not triggered him to rethink his future at the airline.
“There’s always people out there asking for my head,” Mr Joyce said.
He announced the airline’s dire international arm bled $497 million and would be split off, in a move that better prepares it for foreign investment. This result was more than double the previous year’s loss.
The bulk of the overall statutory loss was due to a monster $2.6 billion being written off the value of its international fleet.
Mr Joyce said a key reason for the size of this number was the value of the dollar — when the aircraft were purchased it was as low as 57c compared to today’s 93c.
“We believe the worst is over for us now,” Mr Joyce said.
“The management, the CEO, the board are fully behind that ... and we are making progress in that direction,” he said.
‘‘We really want to see Qantas survive for at least the next 90 years.”
Qantas still held $3 billion in cash and after the writedown delivered an underlying loss of $646 million, which was about $100 million better than the market expected.
Mr Joyce ruled out selling the lucrative frequent flyer program, the bright spot on the balance sheet which delivered a 10 per cent improved profit of $286 million.
“That loyalty program has doubled in size over the past five years. It’s been huge growth from five million to 10 million members,” Mr Joyce said.
The airline’s domestic arm made a $30 million profit, down from a $365 million profit in 2013.
Mr Joyce signalled a cooling in the capacity war, which meant seats on planes were selling at a loss because there was more supply in the market than demand.
SCROLL DOWN FOR MORE
But Qantas, he said, were “still protecting our domestic position” and would battle hard to build the premium domestic business.
“There is a clear and significant easing of both international and domestic capacity growth, which will stabilise the revenue environment,” Mr Joyce said.
He ruled out any further job losses and said half of the 5000 jobs already earmarked to go had been cut.
Deputy Prime Minister Warren Truss backed the airline’s direction.
“While the numbers are dramatic, the reality is Qantas is a strong company and seems to be positioning itself for a better future,” Mr Truss said.
The result promoted calls for further relaxation of the Qantas Sale Act to allow for increased foreign investment in the airline.
Businessmen Ron Walker and Jeff Kennett urged the federal government to remove the 49 per cent cap on foreign ownership.
Former Victorian premier Mr Kennett said foreign ownership of the international arms should be considered because Middle Eastern airlines were being funded by their governments. “I would like to see Qantas remain flying,” he said.
“If they have to make it compete on a level playing field with its competitors, well so be it.”
The Qantas Sale Act, created in 1992 to prepare the airline for privatisation, was updated last month to allow a foreign airline to own 49 per cent of Qantas, up from 35 per cent.
The Labor Party blocked full foreign ownership.
Qantas last paid a dividend to shareholders in 2009, the year Mr Joyce took on the job.
Jennifer Sexton
QANTAS boss Alan Joyce copped a pay cut and did not receive a bonus as he wrote the national carrier into the corporate history books with its biggest loss.
But, despite the sea of red ink, Mr Joyce still managed to take home $2 million in the year to June and insisted, even after delivering five years of dire results, that “there’s no better job” to have.
“I’m committed to this brand. There’s no better job, there’s no better airline, there’s no better company, I think, in Australia. I’m passionate about it,” Mr Joyce said.
He accepted no personal responsibility for the woeful state of Qantas accounts as he announced the $2.8 billion loss.
Mr Joyce missed out on two big bonus payments — a $775,000 cash bonus and a $388,000 deferred award bonus — and $53,000 was sliced off his base pay.
In all it was a 40 per cent pay cut, or $1.2 million less than the previous year.
The bonuses were not paid after he implemented an executive-wide policy cancelling all incentive payments, regardless of whether corporate performance targets were met.
Asked yesterday whether it was time for chairman Leigh Clifford and himself to consider their futures, Mr Joyce said: “Nearly every carrier operating into Australia is saying it’s losing money. That’s nothing to do with Leigh or me.”
Australian Services Union assistant national secretary Linda White disagreed: “The board and CEO are the architects of this loss.”
She said Mr Joyce had failed to reveal the growth plan for the airline. Instead, through splitting the international and domestic arms of the business, he had created a “a corporate shell game’’, adding: “It’s not a game changer that’s going to bring in revenue.’’
Mr Joyce’s turnaround strategy involves cutting $2 billion in costs and 5000 staff and — if he pulls it off — he expects to deliver a profit this financial year.
Originally published as Clipping the wings of the flailing kangaroo: Qantas posts record $2.8 billion loss, CEO Alan Joyce blames external forces
610 Rex workers to lose their jobs as administrators move in
Rex workers have been briefed by administrators on 610 job losses across the businesses, the Transport Workers Union says as it pushes for the government to step in with an equity deal.
Major job losses revealed as airline collapses
The shocking number of job losses has been revealed after a major airline collapsed, with flights cancelled and planes grounded.