All Change At The Top?

At just 42 Alan Joyce will need all the youthful energy his years can bring as he steers the airline through high fuel costs, economic slowdowns and a tarnished brand and safety reputation following the QF30 incident.

Not since the QF1 runway over-run accident at Bangkok has the Qantas safety record been under as much heat as it is at the moment.

The media scrutiny of the airline has been intense, and the damage to the once gold-standard Qantas brand incalculable. No number of Rain Man movie re-runs can undo the damage done by hours of TV footage of 747-400 VH-OJK at the gate at Manila Airport with a hole blown in its side.

And while a lot of the media commentary was ill-informed guess work, the level of scrutiny should in fact be welcomed. High levels of media scrutiny drive high public standards and expectations, which keeps the air safety responsibilities of airlines foremost in their minds.

That high level of media interest is perhaps behind CASA’s move to investigate Qantas’s air safety and maintenance standards, announced after a Manila bound 767-300 had to return to Sydney due to a hydraulic fluid leak.

To some degree this CASA investigation must be the final insult to Qantas – given the level of engineering expertise within Qantas and its near peerless safety record across its 88 year history.

And all this has come on top of and just weeks after the hundreds of flight cancellations Qantas had to make due to industrial action taken by its maintenance engineers.

On their own none of these incidents and issues are seemingly related, but they perhaps point to a wider issue at the airline. Since privatisation Qantas management has done an excellent job at turning a great airline into a great business (to borrow a famous phase from Sir Rod Eddington).

But at what cost? The airline has done a great job in extracting the maximum outputs from its aircraft and staff, but industrial unrest and aircraft serviceability issues are seemingly suggesting that the search for efficiencies is hitting the point of diminishing returns. Twenty year old 767s are starting to have serviceability issues, and parts of the workforce are feeling unloved and emboldened to make big pay claims. The machine is highly tuned and very efficient, but perhaps its constituent parts are no longer working in harmony.

At the press conference announcing his appointment Alan Joyce quipped that the only difference you will notice between himself and his outgoing predecessor in Geoff Dixon is the Irish accent. No doubt he said that to pacify the share market about the leadership succession, and no doubt most of the group’s key strategies (the twin Qantas/Jetstar brands, Asian expansion etc) will remain in place, but staff engagement and relations could well see a fresh approach.

“I certainly will take a top priority in terms of focusing on employee engagement going forward,” Joyce told the ABC’s Inside Business program on August 3. “I think that’s an important area that we need to focus in on,” he said.

The fact that Qantas is a very well run business has meant Qantas employees have enjoyed a level of job security far above many other airlines around the world, and that’s to be applauded, but it’s clear that in some quarters at least a fresh approach to staff engagement will be welcomed.

It’s interesting that all this has occurred as Qantas has been busy for what should be its biggest PR triumph in many, many years, the first A380 arrival (at presstime expected at the end of August). Old aircraft are not necessarily less safe than new aircraft, but the two Manila incidents illustrate the importance of the regeneration of the Qantas long haul fleet – if only from a reliability and safety perception perspective.

Qantas does have plans in place to begin replacing 747s with A380s and 767s with 787s – and deliveries of both have been delayed by factors outside Qantas’s control. And the airline is in a much better position for fleet renewal compared to many in the US, but differing tax rules mean Qantas is at a significant competitive disadvantage in being able to replace aircraft compared to key competitors Singapore Airlines (which enjoys faster aircraft depreciation schedules) and Emirates (which pays no company tax).

It’s a tough game with an unequal playing field. We wish Alan all the best.