When will Alan Joyce leave? The perennial question for Qantas’ CEO

29 August, 2017

When Qantas was in the depths of discontent back in 2011, the question was asked daily, often on the front pages of newspapers across Australia; and back in those days, people read newspapers.

The politer headlines were rhetorical questions at best; but most didn't even have question marks at the end.

After Mr Joyce shut the airline down in Oct-2011, the calls continued for years, as staff cut after staff cut was announced. Its shares slumped below AUD1.

Then gradually, the turnaround began. It rapidly gathered momentum. Last year the flying kangaroo made its best profit in 95 years of history. And last week Mr Joyce announced it had again achieved a remarkable 20% return on invested capital (ROIC), the measure of choice for airlines today. Only a couple of airlines have done better.

From being a junk stock, it is today one of only a handful of the world's 2,000 airlines that has an investment grade rating.

And still the questions continue: When will Alan Joyce go?

At last, a hint

Yesterday, pretty much for the first time, he gave a hint of departure plans.

Not that he's obviously planning to go anywhere for some time yet - and seriously, unless it was to become UN Secretary General, why would he? After all those years of slings and arrows, he's been through the period of quiet gloating at all the experts who jumped on the must-go bandwagon, he's sailed into calm waters with a sweet tailwind and is now in a position to refine the new direction and prepare for the inevitable shocks that will be down the road a little. Meanwhile, why not enjoy the good times! After all, the money's not bad.

So, when the entire cabinet was reshuffled on 28-Aug-2017 Mr Joyce was saying I'm not going for at least a couple of years. It will take that long for each of the executives to generate the skills in their new roles. The crunch comes when they start to say, "OK Alan, it's time to move over". That probably has a two year timeline. Today they are a team. If the time gets stretched too far the team starts to disintegrate.

Preparing for an orderly succession

That sounds like a sensible corporate strategy. Common sense even. But common sense and the airline industry typically don't belong in the same sentence. It is a business not for making money but for indulging passions; it's about big boys toys and even bigger egos.

That's probably why orderly succession is so rare in airlines. Arguably Alan Joyce's own arrival as CEO was reasonably orderly, although of the three main internal candidates, Mr Joyce was the only one who had run an airline - having set up and led Jetstar.

Peter Gregg was CFO and John Borghetti, who had come up through the ranks at the airline, was very much a network and revenue specialist, good qualifications, but neither had been specifically groomed to be responsible across the wider range of activity.

With the current crop of the executive team there is a valuable mix of experience, one which will be enhanced by the new shuffled positions. The media focus is on Jayne Hrdlicka and Gareth Evans as the most likely to succeed, but the reality is that any one of the senior team is now in the running. Andrew David also has experience running an airline; he was CEO of Tigerair and COO of Virgin Blue before that; Olivia Wirth now has charge of most of the sexy bits that will define airlines of the future, Lesley Grant has taken Qantas Loyalty to one of the most successful loyalty programmes in the world, and Alison Webster has taken a big step up with her new international role.

It's encouraging that there are at least three women in the mix. When, five years ago, CAPA did its first global survey of women running airlines around the world, we tracked down eight of them. Today, as Carolyn McCall leaves easyJet, there are six. Not a great trend.

But then who knows what happens next in the airline business….

There's a tendency to assume that the present is the normal. In fact, we are in the middle of the most rosy time ever in the airline industry. Industry profitability is at an all time high, fuel prices are low, the global economy is reasonably solid, traffic growth rates are at historic highs and generally we are going through a period of relative stability.

Qantas has an excellent base to work from, garnering about 90% of the profitability of the entire domestic market, with a well protected international offering. So it is better positioned than most.

Alan Joyce has every right to be proud of what he has achieved. His next big goal is, with the assistance of a qualified board, to ensure that the national icon's future remains in safe hands beyond his departure. Probably 2019. There, we said it.