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.
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.”
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.