Only two months into the job, the pinnacle of a three-decade career at Qantas, new chief executive Vanessa Hudson faces a mountain of troubles as she meets the company’s shareholders at the annual meeting today alongside chairman Richard Goyder. Michael Sainsbury analyses the Qantas corporate culture.
Hudson and Goyder must be expecting a big turn-out. The AGM is being held at the Melbourne Conference and Exhibition Centre. This was supposed to be the fairytale ending of one of corporate Australia’s lobster farewells for her predecessor, Alan Joyce. Instead, it will be a baptism of fire for Hudson, as angry shareholders vote to elect her to the company’s embattled board.
Goyder, never one to be bested, has set up his own, even longer farewell – getting ahead of growing calls for his resignation by announcing a long-dated departure last month. But he may already be wishing he had not, the cool $750,000 or so that he will collect along the way notwithstanding.
He may experience the ignominy of watching one of his chosen directors, Todd Sampson, fail in his bid for reelection. And he may quite possibly collect a dreaded ‘first strike’ with 25 percent of shareholders’ vote against the company’s remuneration report. A second strike at next year’s AGM would see a spill of all directors.
As part of his own skin-saving exercise, Goyder has prevailed on fellow directors Jacqueline Hey and Maxine Brenner to step down. An early signal of shareholder fury at Qantas directors was the unusual 7% vote against Brenner when she stood (successfully) for the Telstra board last month. But that’s how it rolls in corporate Australia, fail at one blue chip company only to get a rails run onto a seat at another.
Lack of succession planning
A common feature, as has been noted, of Goyder’s boards (e.g. Woodside, AFL) is the clear lack of a succession plan. Qantas is now searching for a credible replacement from outside the current board. In any case Qantas is well overdue some fresh eyes, because the strong early signs are that Hudson is simply, “Alan with a wig,” as one wag put it,
Hudson, too, has surrounded herself with “friends and favours” in the expanded 13 person executive team, according to one insider. Only one, Andrew Monaghan, has any real operational experience, extraordinary for a company whose core business is uber-operational logistics.
This week, she fluffed her chance at bringing more operational experience onboard when she replaced the outgoing QantasLink chief John Gissing after an international search, with Rachel Yangoyan, a company veteran who rose up through the ranks in loyalty marketing.
Perhaps even more head-scratching is that Qantas is now that very rare ASX100 company that has a chief financial officer, Rob Marcolina, who has little apparent accounting/finance qualifications or experience. In many ways, Marcolina, who was running strategy and human resources, represents one of the key failings of the Joyce era – and one that increasingly inflicts corporate and bureaucratic Australia – the inexorable rise of consultants.
Marcolina cut his teeth working in consultancy in New York and then later 13 years at Bain & Co in Los Angeles and Sydney, joining Qantas 11 years ago after a short stint running Basketball Australia.
Joyce became enamoured of consultants during the time he and former Qantas chief Geoff Dixon created Jetstar with the help of the Boston Consulting Group (BCG). Since then, former and current Qantas executives say, consultants have been a permanent feature of the airline.
One former Qantas executive who worked under Joyce for many years, told MWM that “they fell in love with consultants after the Jetstar thing, and it just got worse and worse and worse. Then they started importing them into the business. And what you would see is all they were good at was gathering information to tell a story to present to those higher up. But what actually happened beneath them didn’t matter. It was irrelevant.”
“And I think that’s a lot of what’s happened with Qantas is you’ve got these people at the top who have been so focused on keeping people above them happy, but no one’s really looked at what’s happening.”
The number of times that management has been able to convince themselves – and I really mean convinced themselves of being right, when quite clearly what they were doing was wrong – was astounding.
“Consultants also helped to create an environment where everyone agreed with them and with Joyce. The problem was, that quite a few years out from the end, there was no one in the company – probably not even the board – who would say no to Alan. there was no one to tell him that this or that was a dumb idea.”
Those dumb decisions – the illegal sacking of 1,700 staff, the outrageous selling of tickets on 8,000 flights that had been canceled, the widespread passenger fury at the collapse in standards at the airline due to its staff, service standards and infrastructure’s death by thousands of cuts finally caught up with Alan Joyce just before the planned end. They are now Hudson’s problems.
To fix them, it’s hardly a surprise that she called in BCG – fresh off a major project for Qantas Loyalty to try and boost its revenues, once more.
Those pesky customers
After “apologising” to customers when taking up the top job, it has taken Hudson barely eight weeks to turn her back on them once more. Hudson has hiked fares by 3.5% last month blaming the oil prices. The problem is, the Jet Fuel price averaged 14.5 less last week than a year earlier. Just in case customers have any delusions that things may be different this time, along came Qantas’ bizarre defence to the Australian Competition and Consumer Commission’s lawsuit in the Federal Court for the 8,000 “ghost” flights. Instead of biting the bullet and showing that change had happened and settling, easily blaming it on Joyce.
Behind the defence is Qantas preening, combative General Counsel Andrew Finch, who was responsible for the disastrous High Court finding of illegal sackings, and recently admonished a Senate inquiry to wrap up because he might miss the last plane to Sydney. So many ironies and frankly, it’s bewildering that Finch still has a job.
Hudson has doubled down on her fight with the pilots’ union at Perth-based subsidiary Network Aviation with the two sides now heading for four-day mediation next week.*
(Tail) spin over substance
And spin – the hallmark of the Joyce era continues taking precedence over substance with the high profile relaunch of flights to Paris and Shanghai. The problem is, Qantas can not fly these routes with the daily regularity it would like due to the dire lack of aircraft.
The company’s aircraft shortage continues to plague its international schedules with an engine damaged in New York, causing serial cancellation on the Pacific route and further chaos caused by a lightning strike on a Boeing 787.
Qantas has also cut the through flight from Melbourne to London (via Perth) for the first time, preferring to let Sydney passengers fly to Rome and Paris through Perth, causing a tsunami of negative feedback on social media groups.
Qantas’ long haul aircraft shortage is so bad that it’s one of two ‘wet lease’ planes from Finnair began working the Singapore-Sydney route with another due to start Sydney-Bangkok in the new year.
It has also leased a Nauru Airlines plan to fly its Perth-Broome route (and potentially strike break). Pilots reported that it flew without air conditioning Thursday.
Qantas will not take delivery of any new long haul aircraft until at least 2027, so customers can continue to expect problems flying internationally until then, as planes age, are worked harder and shortages in the maintenance division – in both staff and spare parts continues.
One engineer told MWM:
Nothing has changed. We still don’t have enough parts, planes flying with multiple maintenance issues – they are still allowed in the air but not everything inside works.
Enjoy your next flight.
* This article has been updated to remove references to the role of TWU representatives in negotiations.
Michael Sainsbury is a former China correspondent who has lived and worked across North, Southeast and South Asia for 11 years. Now based in regional Australia, he has more than 25 years’ experience writing about business, politics and human rights in Australia and the Indo-Pacific. He has worked for News Corp, Fairfax, Nikkei and a range of independent media outlets and has won multiple awards in Australia and Asia for his reporting. He is a fierce believer in the importance of independent media.