Qantas profit estimates just jumped again this week when Alan Joyce threatened to axe regional routes, ramping up pressure on politicians to stop the looming industrial relations reforms. Michael Sainsbury reports.
The priorities of Qantas chief executive Alan Joyce and chairman Richard Goyder were on display again this week, preferring the fortunes of shareholders and executives over those on the front line of the airline’s low altitude standards – staff and customers. Joyce even reprised the age old Qantas tactic of pressuring politicians by dangling the idea he might shut down a regional route or two … if industrial relations policy did not go his way.
It’s a tricky one. The board owes its duty to profits and shareholders but if they smash customers and staff too hard in the process, that hits profits and shareholders harder for longer.
“The bill places at risk a vigorously competitive, efficient and innovative Australian aviation industry,” Qantas said in a five page November 11 submission to the Education and Employment Legislation Committee looking at the Secure Jobs, Better Pay Bill.
“For the Qantas Group, it will almost certainly mean less flying because costs will rise and demand will be destroyed – particularly on marginal routes. This will result in less investment and fewer jobs in aviation, with a flow-on effect for communities and tourism.”
The Transport Workers Union put it succinctly:
Alan Joyce arguing against workplace reform is the exact reason we need it.
If you live in Grafton, Lismore or Kangaroo Island (ah, the irony), or want to fly from Melbourne to Albury, for instance, the Flying Roo may not be hopping your way if Joyce is forced to stop his practice of handing staff real wage drops and instead have to pony up wage rises that at least keep pace with the cost of living.
Meanwhile, the airline’s 1200 domestic flight attendants voted to take protected strike action, joining engineers in the fight to take a slice of the company’s financial good fortune. The day before, the group announced estimated net profit before tax for the first half of the 2023 financial year of $1.35 to $1.45 billion, up $150 million from its previous guidance.
Nobody plays the “game of scoreboards” like Joyce. For shareholders, for “the market”, things are terrific. Booming profits. Look at the scoreboard! For government, unions and employees, they are doing it tough. That “scoreboard” shows the risks and the costs.
For customers, well they get the outcome: poor staff morale, falling service standards, high airfares. That scoreboard is showing a range of “ducks” and low scoring innings.
Competition is great, just not for us
Qantas competitor Rex had to drop flights to some destinations in June this year. According to Rex’ Deputy Chairman John Sharp:
Qantas’ predatory attacks on Rex’s network mean that we no longer can support the marginal routes and we need to channel our resources to the biggest regional routes where the financial returns are much better.
Sharp described Qantas as dumping thousands of seats on Rex routes and using its ever healthier balance sheet to force the smaller airlines out of regional routes. Those routes are now beholden to Joyce’s shenanigans; cutting a few is nothing compared to grounding the airline, so who would bet against that?
Qantas has also threatened every small business that relies on tourism. It has directly threatened the livelihoods of people in smaller regional communities. But like all bullies, Qantas would not elaborate on which routes it might pull. For what is a campaign of fear and uncertainty without some doubt thrown in? Its aim is to put the wind up as many people as possible, putting pressure on local politicians to let Qantas have its way in order to protect themselves.
From Qantas point of view it’s a smart, albeit ethically questionable, way of lobbying the government. Hardly new though. Previous Qantas executives played the same riff.
Demonising foreign competitors is also in the routine, always has been. Qantas is also lobbying the government to stop rival Qatar Airways’ bid to double its flights into Australia that includes a link up with Qantas’ main rival Virgin Australia. The kind of vigorous competition that may benefit consumers, not just Qantas.
If the Government does cave in to Qantas and deny Qatar’s bid for more flights, it will be guilty of restricting competition in the Australian airline industry. Alan Joyce has made it clear he sees Qantas’ “natural market share” as 70%. This has, somehow, crept up from the same “natural market share” of 65% a decade ago, and is as risible as that phrase itself.
Joyce won’t stop jesting, but can Albo and the public avoid being dacksed again?
It’s a bargain
The government is not caving on IR reform, however, despite the lobbying. The Senate Committee said :
“Qantas’ assertion that it cannot afford to fairly bargain with its splintered workforce should be viewed in the context of its estimated $1.2 billion half-yearly profit, its recently announced $400 million share buyback, and its recently announced $4 million annual bonus for its Chief Executive Officer (CEO), Mr Alan Joyce, which suggests Qantas may have the financial capacity to end its deliberate wage suppression tactics.
“This strategy of fragmenting a workforce across numerous employing entities to disenfranchise workers is taken to its most extreme at Qantas, which has split its frontline workforce across 38 different employing entities, including 17 Qantas-owned subsidiaries and 21 external labour hire or services contractors.”
The unions are not caving in either.
The Flight Attendants Union today (24 November) commenced their action in the face of a pay rise offer of an average of 1.2% over five years as inflation runs at 8%. The Enterprise Agreement offered domestic cabin crew shifts from 9.5 -12 hours, and up to 14 hours if there’s a disruption. It cuts rest periods to 10 hours raising concerns of fatigue issues.
Senator Tony Sheldon, former head of the Transport Workers Union and long time Qantas critic, let rip again only days after accusing the company of “mongrel corporate gorillaship”, telling Sky News:
They’re not only gouging from the Australian community, they’re also gouging from their own workforce. What Qantas has done in its negotiations – whether it be pilots, engineers, flight attendants and of course their white-collar workforce – they’re saying, ‘If you don’t turn around and accept the agreement, we’re going to put you back to the award’.
Qantas’ critical engineering division still does not have an EBA offer, and licensed engineers are bitter about this new profit forecast.
“We can see every day how they make their profits. Everything is on a shoestring budget. Aircraft hold items and deferred defects on the international fleet would be at an all time high. They will put it down to parts. I put it down to not enough people or ground time,” a Qantas engineer said, in comments typical of a range of Qantas staff who MWM spoke to:
Seeing the amount of flights canceled domestically on both Qantas and Jetstar is astounding. Some would be for broken aircraft, some would be for operational reasons. Something will give. It always does.
Below top level management, the white-collar workers are also miserable. They have been handed pay salaries of 1.2% annually across five years and many are hanging on for a decent raise next year, people in the business told MWM. There is also unease in the Qantas Loyalty division that profit targets that have been set are “unreachable”.
The lack of proper pay increases has other consequences, too. Qantas controversial Los Angeles facility, where it carries out heavy maintenance for its 787 and A380 long haul aircraft, remains under pressure.
The latest incident was an accident with a 787 aircraft that saw its rudder severely damaged and placed out of service over a week ago. It was an accident local engineers said was “completely avoidable.” They put it down to the LAX base’s lack of licenced engineers as it struggles to retain staff; they are trained by Qantas and then take higher paid jobs elsewhere in the airport, local engineers said.
Executive takes off too
In the wake of the profit upgrade, Joyce and his executive team saw their potential windfall from the delayed ‘Retention & Recovery Program’ bonuses from last financial year vault even higher.
The scheme hands out 42 million Qantas shares to Qantas’s top executives and staff, with Joyce taking home a cool $3.9 million worth. This week’s profit announcement saw that pay day of $698,000 rise to $4.355 million based on today’s share price. Add that to his $2.1 million base salary (up almost 10% from the previous year) and “deferred” long term bonus, the third such deferral in three years. Joyce’s pay for the last financial year would be, at today’s share prices, a cool $9 million.
Qantas board gets priorities straight – its own pay – as Alan Joyce edges towards $8.7m package
To add a bit more cream, Joyce and his team’s short and long term bonuses for this year’s schemes are being boosted each time Qantas’ profits and share price rises. The long term scheme relies on the share prices and comparisons with other offshore airlines only, although those airlines operate in other markets and few have Qantas’ market share. The short term scheme also has a hefty component related to financial performance, not so much on operational performance, let alone customer satisfaction.
Last week, the Australian Services Union said that: “Qantas are seeking to strip one in three workers of their negotiated pay and conditions. So it comes as no surprise to anyone that Alan Joyce was nominated for worst boss in the world. Although he came in third, we feel that Joyce deserves a dis-honourable gold medal.”
Courtesy ASU via Twitter
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.