Did Alan Joyce cost Qantas our trust?

Then came the raging tempest that was COVID-19. The airline that emerged from the storm looked very different to the one that had entered it, with mass layoffs, customer service headaches and a CEO that seemed indifferent to criticism.

In his new book, The Chairman’s Lounge: The Inside Story of How Qantas Sold Us Out, former columnist for The Australian Financial Review, Joe Aston – who had previously been a Qantas employee himself, having worked for the carrier before moving to the Financial Review – breaks down what went wrong. Aston joined Australian Aviation for a podcast in November, in which he discussed Qantas’ big pandemic mistakes.

AA: How did you come to write a book about the Alan Joyce era?

JA: It sort of happened by accident, because I did not leave the Financial Review to do more of the same of what I was already doing. I wanted to have a shift or a break or do something different, because in the last 12 months at the AFR, I wrote about Qantas very, very frequently, as many people will remember. I’ve always wanted to be an author, I didn’t have anything else to do, and a book deal came my way.

As I watched the early months of the Vanessa Hudson era and how very quickly the company appeared to be in, I suppose, PR wash mode – this was all a minor thing, it all happened by accident, let’s just be focused on the future, let’s pretend none of this happened – it did fortify me that what happened at Qantas in the COVID era and coming out of the COVID period needed to be chronicled in one place so that the Australian public could properly understand what was done. That’s what this book sets out to do. It took 10 months down the rabbit hole, but it was really enjoyable.

It’s the most time I’ve spent researching Qantas since I put together the annual report for the company in, I think, 2009, so it’s a weird circular place for me to get back to.

AA: What did you think of Joyce as a person?

JA: I didn’t have a very deep professional relationship with him, but I got to know him as a journalist. I always found him quite pleasant and fun to be around. He enjoyed socialising – or if he didn’t enjoy it, he put on a good show of seeming to enjoy socialising with journalists – and I went to Everett, to Boeing with him and others to collect the first Qantas Dreamliner. I always found him quite personable. He was also very feisty.

In my experience, if he disagreed with something, he was very, very argumentative – that’s probably rich coming from me, but it is consistent with someone who’s got a very heightened sense of justice and a sense of unfairness, and he reacts quite strongly to any sense of unfairness. I’m not sure that in the later years, his perception of actually what was fair and unfair was necessarily right, but that’s my observation.

AA: You went from something of a defender of Joyce to one of his biggest critics – what happened?

JA: I think there were definitely times where I defended him when I thought he deserved defending. One of those instances was when he was being attacked by Miranda Devine over the marriage equality campaign, which he was a big part of successfully getting over the line. I certainly was not an antagonist in any sense, for a long time, and I think, in fairness, it was easier to be positive about Alan Joyce’s performance as Qantas CEO in the early years – or certainly, I should say, maybe more accurately, in the mid years, sort of post-2015, because the first few years were pretty ugly.

He sort of stabilised the ship by about 2015, and then he had four or five very good years, at least financially, but also customer satisfaction-wise, employee satisfaction-wise. He had some detractors, but overall, at that time, Alan Joyce was very, very highly regarded. He was GQ Man of the Year, he was AFR Business Person of the Year, shareholders loved him. He was very widely liked in the community.

So, how did that turn around? Well, I think the thing is that his performance turned around, and what Qantas did in COVID was what changed my perspective. I certainly didn’t launch into Alan Joyce in 2020 or 2021 – it was in 2022, when things had started to go very wrong for Qantas, that I first started to get interested in what the company was doing.

AA: Some, like new Qantas chairman John Mullen, have argued Joyce saved the airline from COVID-19 – do you agree?

JA: No, I don’t accept that. I suspect Qantas would have survived COVID irrespective of whether Alan Joyce was there. He deserved a lot of credit for that fact, because Qantas’ balance sheet was in such a strong position – partly, by the way, because it had not been investing in the fleet to the extent that it had been. Historically, it had disinvested in fleet and reduced its debt and had a lot of assets that it could borrow against, so even with no revenue, or almost no revenue, it could survive in hibernation mode.

At the beginning of May 2020, they said that they could survive with basically no revenue until Christmas of 2021, so Qantas was never going bankrupt, and it understood fairly quickly that that was the case – which is why Qantas made quite a calculated decision to fight against any financial lifeline to be extended to Virgin Australia.

Joyce calculated that Qantas didn’t need money, so therefore, if they could say they didn’t need money, Virgin would not be able to get money. And, of course, Virgin couldn’t survive without money, because they did not have as strong a balance sheet, and that is also a reflection of the way that company had been run previously.

AA: You don’t agree with the line that Qantas was “11 weeks from bankruptcy”?

JA: Objectively, that’s just not right. They were never 11 weeks from bankruptcy, they were 11 weeks from exhausting their cash balance if their expenditure rate didn’t change – but that’s just a silly measurement, because of course your expenditure rate changes.

For instance, when you ground an airline, you don’t continue to pay for the catering for 11 weeks. You don’t continue to pay all of your staff, because they’re stood down without pay and they’re on JobKeeper.

You don’t continue to pay charges for rent to Sydney Airport and Melbourne Airport – which, by the way, of course, they didn’t, and they had disputes with those airports about refusing to pay their bills. So, it’s not true that they were ever 11 weeks even from cash exhaustion, which is different to bankruptcy.

Of course, that’s also not something that Qantas ever said at the time – they never said that in 2020, they only ever said that for the first time in 2022, and the reason they started saying that in 2022, I would argue, is because they were looking for excuses for their own terrible operational performance – some of which was not their fault, was COVID, supply chain, disruption, staff illness, et cetera – but much of which was their fault. For instance, what they could control was that they sacked way too many people to operate a functional airline.

AA: What were Qantas’ biggest missteps during the pandemic?

JA: Well, I think it clearly sacked too many people, and obviously Qantas was intent on demonstrating to shareholders that it could significantly increase its profitability – and that’s the basis on which that it raised equity capital in June 2020, and that’s why they needed the equity capital, to pay a billion dollars in redundancy payments. But I would argue that in circumstances where you didn’t actually need to pay those people their salaries, they were almost all stood down on leave, without pay and on JobKeeper, there was no need to over-index.

You didn’t have to sack 10,000 – you could have sacked 5,000, and then thought about sacking more later if you needed to, because, of course, they weren’t actually drawing salaries. And what we then discovered in 2022 – or even late 2021, to be honest – is it’s hard to get people back, and you’ve got to retrain them. Part of the disaster of 2022 is that Qantas didn’t keep its pilots training up to date, they didn’t keep the cabin crew training up to date, they didn’t even keep their cabin crew trainers, a lot of them, so that made the operational breakdown in 2022 far worse.

I think, obviously, talking sacking people, the illegal sacking of those baggage handlers, burned a lot of reputational goodwill – there are a lot of people out there who don’t like Qantas, customers who don’t like Qantas, because of the way they’ve treated their staff, and that was a shining example of it.

And then I think, from a customer point of view, what they did with COVID credits has damaged them greatly – firstly the fact that customers were not properly informed that they were entitled legally to a refund, and secondly, the fact that they were so difficult to redeem. Then there was the sense in 2023 that Qantas was sort of looking to allow a maximum amount of this money to expire so that they could permanently keep it as profit. Qantas denies that was what they were trying to do, but there was a real countdown on toward the end, and the way that the company obfuscated about how much was owed to customers, I think, did them a lot of damage. I suppose I would call them the greatest hits.

AA: Conversely, what did Qantas do right?

JA: The whole airline industry globally was completely disrupted, and it was very hard to adapt to the way things were changing all the time. No one had ever been through any of this. I think the feat of contraction, to take Qantas from a domestic and international carrier of 300 aircraft, and then effectively mothballing the whole thing, getting it down to $40 million of spending a week, that feat of contraction was extraordinary and quite unprecedented, to get themselves into a position to survive on a low cash burn.

That’s almost without precedent – and of course, that’s why I don’t agree that they were ever going to go bankrupt, because they did that so quickly and so effectively, and that’s actually one of their great achievements.

It’s not easy either, with borders shutting and opening, and if Australian government policy had been more reasonable around the way state borders were opening and shutting, I think Qantas could have lost a lot less money. They could have got themselves at least into having an effective and not too unprofitable domestic business, that employed lots more people, by a lot earlier than they did. They probably would have gotten an extra year of normal operations, and that’s not their fault. Alan Joyce was a very effective lobbyist at the time, and that was a very big part of his job, trying to convince premiers.

I don’t think there was any issue convincing the federal government but trying to convince premiers to be reasonable about borders – I think he was an important voice in the ear of the NSW government, but ultimately, I think you couldn’t keep the premiers all on the same page. That was a fight that just couldn’t be won.

AA: Do you think Qantas’ missteps in COVID contributed significantly to a loss of trust in the brand?

Oh, definitely. I think it was steps in COVID, and then they came home to roost as they came out of COVID and given the experience of people in 2022 when passengers were told they weren’t “match fi t”, it was their fault that there were lost bags and late flights and record cancellations, you couldn’t get anyone on the phone and so on. You’ve got to remember that as the context for the customer mindset. You then come into 2023, and Qantas makes this record profi t of $2. 5 billion, and they still hadn’t recovered the customer experience. It’s obviously better than 2022, but you know, the customer experience was still pretty terrible in 2023 and they’re printing super profits and there’s deep, deep resentment about that.

So, it wasn’t just what happened in COVID, it was the way they came out of COVID. This isn’t just me saying this – I have in the book Qantas’ largest shareholder I talked to extensively, and quoted extensively, and he makes a good point that he thought Alan Joyce was so focused on delivering the turnaround of all turnarounds, a record profit and the biggest profit ever, that he lost track of the fact that maybe they should have made a little bit less. Would it have been that bad if they’d made $2 billion and they’d kept fares slightly saner? Maybe they reinvested in the number of staff in airport terminals and more people in the call centres, and reinvested in the catering, and done some of those things earlier.

These are now all things that Vanessa Hudson has had to do, and of course, her profits have been smaller – but maybe if Alan Joyce had done that in 2023 instead of going for the crowning profit, to depart on the great grand sayonara, the uproar would not have been so great.

AA: On balance, do you think Joyce was a good CEO?

If he’d retired in 2019 when he’d been CEO for 11 years, I think there’s no question you would have said he was a good CEO, even though I still have reservations about the way he began to disinvest in the fleet from about 2014 quite heavily, in that the implications are only coming home to roost now. But you have to be fair, he would have been seen as a very good CEO – and that’s when he had a conversation with the Qantas board, and they gave him the contract extension then for three years, and that was, I think, the key turning point. That was the absolute big mistake moment. I just think the missteps were so bad and so public and so profound in the years from 2020, particularly in 2022 and 2023, that on balance, you have to say he was not a good CEO.