Challenges

He’ll need to draw on all of that experience and his youthful drive as he pilots Qantas through what is increasingly called the ‘Great Recession’, which has seen international airline traffic figures drop precipitously – Singapore Airlines’s traffic fell 20 per cent (yes 20) in February compared to February 2008, Qantas international traffic for the same month was down 16. 8 per cent – albeit made slightly less worse by the fact that 2008 was a leap year so Feb ’08 figures incorporate one extra day.

In reaction to falling traffic, Qantas, like Virgin Blue and most every other airline worldwide, has already reduced its capacity significantly. But in interviewing Alan Joyce for Australian Aviation for this issue (from p26), your editor got the sense that further cuts are not far away if conditions continue to deteriorate.

That decision – how many aircraft to park or retire, what deliveries of new aircraft to defer, what routes to cut back on or pull out of altogether, and then what happens to staff numbers – will probably be the toughest test of Joyce’s leadership of the airline thus far. It will be a critical call to get right – cut too gently and the business could be saddled with too much cost, cut too aggressively and you hamper your ability to ramp up again when growth returns.

Still, Joyce promises to act decisively if necessary, continuing in the tradition of his predecessor Geoff Dixon, and he says the main lesson of the Ansett collapse is the need to make swift if hard decisions to adjust to market conditions, with any job losses, while most definitely regrettable, being for the greater good, protecting jobs for the majority of the employees whose jobs remain.

And in the few short months Joyce has been in the job, he has already taken several critical decisions, from calling off the merger with British Airways, to equity raisings, to bringing in new blood as he restructures the airline’s management.

But many eyes will be on him as he navigates Australia’s largest airline group through the continuing downturn, from the group’s 36,000 staff to shareholders who have seen the value of their stock fall to levels not seen in over a decade.

With John Borghetti now joining Peter Gregg in leaving the airline after last year’s CEO succession, Joyce has a very different looking executive team to the one Geoff Dixon led. Not only Joyce himself but his executive committee have plenty of airline experience, but there’s no doubt the departures of Dixon, Gregg and now Borghetti take with them decades of corporate experience. So it’s not surprising at least some investors are nervous – “It’s bloody ridiculous how they have turned over their senior management team,” one unnamed fund manager told The Sydney Morning Herald.

Perhaps some staff feel the same way too, but at least Joyce has identified staff engagement and communication as key priorities. Interestingly too, he says senior management will soon be spending time once a month in customer services roles to get a better sense of what is occurring at the front line, both from staff and customer perspectives. It’s encouraging that Joyce is happy to get his hands dirty.

More fundamentally, Joyce isn’t promising big changes to the Qantas strategy – he is a big believer in the two brand strategy, he remains committed to defending the group’s 65 per cent domestic market share, he is enthused about the potential of the 787 and Jetstar’s pan-Asian strategy. It is more so that the team he will take to go down that path, and the way they go about executing it, will be very different to the Dixon era.

So it will be interesting to see what changes of emphasis evolve under Joyce, particularly now that the widely respected Borghetti, the champion of recent premium product improvements at Qantas, has decided to leave (the newly opened Centre of Service Excellence – see p42 – was very much Borghetti’s baby). As Borghetti, like Gregg, was overlooked for the CEO role in preference to Joyce, it’s perhaps not surprising that he has decided to leave, but he takes with him more than two decades of corporate knowledge, and leaves behind a legacy that includes a renewed focus on service and brand, from the revised livery, to Marc Newson designed aircraft interiors, to investments in airport lounges.

But now, with a new look management team barely recognisable from the Dixon era, Alan Joyce is undoubtedly on his way to reshaping Qantas for new challenges, perhaps in ways not yet fully clear.