Confronting the Qantas Group’s “confronting” loss

written by Gerard Frawley | August 28, 2014
Alan Joyce leaves Thursday's press conference. (Seth Jaworski)
Alan Joyce leaves Thursday’s press conference. (Seth Jaworski)

Three times during Thursday’s annual results press conference, CEO Alan Joyce used the term “confronting” to describe the Qantas Group’s $2.8 billion net loss for the 2013-14 financial year.

“It has absolutely been the most challenging environment that we’ve faced, and the results as a result have been confronting,” Joyce told journalists at Qantas’s Mascot base.

Thursday’s dramatic number is a new record financial loss for an Australian airline. The headline net loss figure looks horrific, and is way higher than expectations, due to a write-down of the book value of the airline’s international fleet to the tune of $2.6 billion, but stripping that and other non-cash charges out still leaves an underlying loss before tax for the year of $646 million.

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It is, as Joyce says, a “confronting” number, even if the airline is projecting an operating profit in the first half of this current financial year, and that: “We have now come through the worst.”

He will be hoping so. Joyce has now been CEO of the Qantas Group since late 2008, and if the airline’s current “transformation plan” of 5,000 job cuts, aircraft retirements and order deferrals and network consolidation, doesn’t soon deliver a profitable turnaround, questions about a change of leadership will grow.

As journalist Steve Creedy of The Australian put it to Joyce during the results press conference: “There are already people out there sort of calling for your head. Do you think you’ll be able to get past the $2.8 billion net loss and explain the underlying improvements sufficiently to counteract that?”

Joyce batted the question away: “Well, there’s always people that are after my head, Steve. I don’t think that changes. It hasn’t changed for a long time.”

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It is arguable that many of the issues Joyce has had to confront at Qantas were not of his making, whether they were fleet or industrial relations decisions made under his predecessor Geoff Dixon, or the rebirth of Virgin Blue as Virgin Australia that has seen massive domestic capacity growth in the past three-four years, or contending with arguably the most liberalised air services regime in the world that has seen hordes of international airlines expand capacity into Australia.

But given Joyce has now been in the position almost six years, he really does “own” the transformation plan he and his management team have put in place to turn Qantas around, and the success or otherwise of that plan will determine his, and his board’s, ongoing tenure.

“I think from our perspective we are as a management team and me particularly as CEO are focused on turning this great airline around, coping with the environmental challenges that we have and making sure that we get this airline back into profitability and to grow the business and all parts of the business going forward,” Joyce said in response to a second question about his time as CEO.

“We’re fully behind that, we believe the transformation program is the way to do it.”

These next six months will really start to show if that transformation plan is taking off.

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20 Comments

  • Kim

    says:

    Think he may be better admitting defeat before there are no employees left. Stark comparison to Air New Zealand’s results -why can’t Qantas learn from our neighbour?.

  • joel behsman

    says:

    Where dose a guy get a job like this, even a seat on the board will do

  • Robert

    says:

    As I keep repeating in this forum, you will soon see either the demise of QANTAS, or its complete sale to an overseas buyer. The underlying problems of this airline have never been addressed and admittedly the unions covering many sections of it will fight all the way till its day of death, rather than make a positive contribution to keeping it alive. Air NZ, the airline of our tiny neighbour which punches well above its weight, is doing it right. For heaven’s sake QANTAS, learn from them !! A possible future move – sell the whole lot to Air NZ !! They seem to win at every form of sport we contest with them, why then can’t they make QANTAS a profitable airline and give us the level of service we deserve. Let’s call the whole lot OCEANIC AIRLINES !

  • Frustrated

    says:

    Will everyone stop comparing Qantas with Air New Zealand! I am not defending Qantas by any means, but you can’t compare the two.

    If Qantas (or Virgin Australia for that matter) were on the brink of collapse, were then assisted by the government using tax payers money to get out of financial trouble and order new aircraft and also slashed the salaries of all the workers, then Im sure both QF and VA will be posting profits.

    Don’t get me wrong, I think that the current QF management have destroyed the airline, but you still can’t compare Air NZ with QF.

  • Ben S

    says:

    If one considers that the $2.8 billion loss wasn’t a cash loss but mostly represents a write-down of their 747 and A380 fleet values the loss isn’t too bad considering the domestic bloodbath they endured with VA and the competition they face from international airlines. Although, it’s still bad what ever way you slice it….

    I just don’t know with Qantas anymore, they seem to miss a lot of opportunities but I don’t think the blame can be laid squarely at Alan’s feet. Just like incumbent Governments that inherit budgetary disasters, I think the die was largely cast for poor Alan prior to him taking the poison challis, I mean reins, from Dixon. Listening to his media conference today you can hear that he isn’t just a corporate cowboy looking for the best deal for himself, he does genuinely display a passion for Qantas. The trouble is it’s just bad news after more bad news. Sometimes it’s just best for the greater good of the company and the morale of its employees if there is a change of management, even if the new management team really can’t do much better. I wish we could poach someone of the likes of Ralph Norris who pulled Air NZ from the ashes after Ansett almost killed it.

  • D

    says:

    Air NZ have a monopoly on there local market vs Qantas who have to compete against oversees govt backed competition(Virgin AU).

  • Tony

    says:

    Wrong on that one D. Air NZ doesn’t have a monopoly in the local market. Jetstar fly the main centres where the profit is, leaving the less profitable routes to Air NZ.

  • Mal

    says:

    Air NZ does have competition domestically in the form of Jetstar. They do not have a monopoly. it is completely incorrect to say this. Jetstar have 20.1% market share domestically in NZ. Just remember, Air NZ are very canny operators. If my memory is correct, Air NZ have competed domestically with Ansett, Qantas and Virgin. They have all been sent packing. Air NZ are on a positive spiral.

    I suspect we’ve seen the worst from QF and you will start to see them sorting things out. Hence the pain all delivered today. From now on there will be continual improvement.

  • PWM

    says:

    It’s all thanks to Allan and his little pet, the various Jetstar black holes.

  • Chris

    says:

    The first point of difference with Qantas and Air NZ is that Air NZ has a lower cost base.

    Air NZ has made some very good fleet decisions, when the 787 was delayed. the 767’s were refurbished and winglets were added along with other modifications to improve fuel burn. Next month they will retire the last 747.

    When you look over the Christmas holiday period they are doing Vancouver 6 times a week and through to April SFO is 10 times a week and dear I say it with a number of Australians who would rather hub through AKL rather than LAX.

    Even if Qantas had got the 787 on time I still think there would be problems as the International airlines they are competing against have a much lower cost base.

    Will Air NZ reconfigure some 787-9’s to fly Auckland – Houston? If they do I know they will be carrying passengers from Australia like they do to SFO and Vancouver.

  • Bob

    says:

    It seems to me that the bulk of the financial loss relates to the various Jetstar Asia identities. Those losses seem to keep getting disguised in QF’s international result. The Hong Kong adventure in particular has simply been a massive financial disaster

  • Dee

    says:

    A.J. Is only as good as the QF Board, which in my opinion are leading him down the wrong path. Remembering B.A. And their low cost carrier, which staff separated into 2 identities until the LCC was sold off, and B.A. Staff realised it was their job and Airline that had to be helped, and they did. So maybe JQ should be fully separated from QF, and stand alone, possibly stationed in Japan, which seems to be their best overseas product. But please QF don’t split the domestic/ international products, your Senior So Called Management isOh So Top Heavy now.

  • Murray Heldon

    says:

    Joyce’s infatuation with Jetstar has destroyed Qantas. The only solution now is to drop Jetstar and try to make Qantas the airline that people will pay extra to travel on. The A380 needs to be reconfigured back to the original configuration, the old 747 and 767 retired, the 787s configured for a realistic Qantas configuration, and only then we could have a truly great national carrier again. However, Joyce and the board have to go….NOW

  • Darren

    says:

    Perhaps it isn’t fair to compare Qantas and Air New Zealand. But from what I have read over the many years is the engagement from management with staff that has made a difference at ANZ. So too the innovation that they have undertaken. Sure there was a bale out from the government, but they didn’t rest there. They went on with it. They don’t complain about geographical isolation and being at the end of the line. Maybe Alan Joyce inherited the problem, but surely staff engagement and innovation are risks worth taking because presently things are not working out. From the sidelines it seems management has paralysis, that they are unable to move boldly in a new direction. Is it the board? Is it the CEO? But what is certain is a need for a new, perhaps radical, direction. And if the incumbent management can’t effect this then alternatives should be sourced.

  • Philip

    says:

    Some blame must go to Dixon for not selecting 777 and also for not appointing Borghetti.

    But Joyce has had enough time and has proved he is not up to the task and MUST GO.

    Still flying 747’s, you must be joking.

    Where are the 787,s for Qantas.

    I hope that Joyce is gone post haste, so that Qantas has a chance to make its centenary.

  • Damian

    says:

    What I don’t understand is how Qantas seems to refer to the domestic ‘oversupply of capacity’ In the third person as if it was somehow one of those factors outside of it’s control. The reality is that Qantas was determined to maintain a market share ‘line in the sand’ at around 65%. This essentially meant that for every extra jet pumped in to the domestic market by others Qantas was pumping in two – all in order to maintain a ‘line in the sand’.

    What would be refreshing if someone came out and said ‘You know what – seeking a market share % target instead of a profitability target has cost us hundreds of millions of dollars and we were wrong – we stuffed up”

  • dale

    says:

    air new zealand is people focus first that how new Zealand market and people are and Qantas need to understand that this is a great airline that need to go back to its core roots to grow people first.

  • Paul Quinlan

    says:

    So they are going to separate from the international arm , can we call the domestic part ” T.A.A .” or how about “Australian Airlines ” ,mmm , I was just thinking about a colour change , maybe blue or something . Maybe blue with a white capitol “T” on the tail 🙂 . Most of all become an airline that is about its own people and the service they love giving run by a management that have a genuine passion for aircraft and the airline itself .

  • John

    says:

    Indeed it wasnt that long ago that Air New Zealand was in a far worse state than even Qantas, required a Government bailout, and at the same time lowered salaries across the board!
    However it emerged with a different management style, that engaged its workers, rather than the confrontation approach of Qantas!
    It also made some smart fleet decisions!
    But domestically you cant compare the situation with Qantas, unlike Qantas that now faces a full service quality airline in Virgin Australia, Air New Zealand is up against Jetstar domestically…………….and has by far the larger share of the corporate market.
    In addition it has a monopoly on all the regional routes, and charges accordingly!

  • John Cox

    says:

    I wish all the Qantas knockers would get there facts right,sugest they read the Financial Review who gave Joyce a pat on the back,i agree with the writer that bought up the Dixon days of Qantas, that management had the opertunity to take the Public Service mentality ,and Union dominance out they did nothing and AJ has had to fix the mess .
    Lets all see what the results are at the next finachial report before you write a great Airline off.

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