On Monday Qantas Chairman Leigh Clifford announced that Alan Joyce would replace Geoff Dixon as Qantas CEO. Joyce will start on the job in November and it’s going to be big ask for him to maintain Qantas’ reputation as the safest and most profitable unsubsidised airline in the world.
Love him or loathe him, Geoff Dixon’s polished media skills had kept the Qantas brand and reputation intact until May 2008 — despite glaring evidence damning the maintenance of Qantas aircraft.
Since then, recent incidents — like the B747 hole and emergency landing in Manila and the B767 turnaround at Adelaide — have produced a massive public relations problem for the airline. Some of the passengers involved in the Adelaide debacle refused to travel on Qantas aircrafts after disembarking and made other arrangements to get to their destination.
Thus far, Joyce has had a fairly easy ride in the protected environment at Jetstar. While Qantas and Jetstar maintain the corporate veil and keep each other at arm’s length publicly, insiders know that Joyce had a pot of gold to spend on the new airline — provided and subsidised by Qantas.
In the first instance, the start-up was made easier by Jetstar’s takeover of established Qantas routes. Qantas subsidised Jetstar’s flight crew logistics and travel expenses costs, as well as the new airline’s booking and ticketing systems. It also subsidised the expensive A330 maintenance costs. Jetstar was given an easy ride on industrial relations; being a ‘greenfield‘ site, Joyce took the opportunity to bypass negotiating with unions on start-up.
Joyce is not looked on with kindness by many Qantas employees. They see Jetstar as a threat which could undermine their terms and conditions of employment. They are therefore very wary of Alan Joyce. Investors seem to share some of these doubts: Qantas stocks have dropped sharply on the market over the last few days.
So: can Joyce rise to the stature of Geoff Dixon and manage the main airline?
Joyce has already said that he will adopt his predecessor’s hardline stance on industrial relations and cost-cutting in order to maintain profitability. The licensed aircraft engineers just settled their enterprise bargaining agreement, however, and standing in the queue for just as good a deal are the technical salaried staff (members of the Australian Licensed Aircraft Engineers Association [ALAEA], the Australian Services Union and the Transport Workers Union), the storemen (National Union of Workers) and the baggage handlers and tug drivers (TWU).
Indeed, Joyce may have to draw on his Irish heritage and work some industrial relations magic. He needs to cobble together what’s left of Qantas’ previous good relations with its employees.
In view of recent high-profile maintenance problems and industrial action, Joyce will also have to work hard to rescue the Qantas brand. The maintenance arm of the business — manpower, parts and resources — has been cut back to dangerously low levels.
These cutbacks have been made glaringly obvious in the aftermath of the licensed engineers’ recent low level industrial action. Even though the action ceased some two weeks ago, the effects on maintenance capability of the airline are still being felt.
According to figures gathered by the ALAEA, prior to the licensed engineers’ industrial action, Qantas on-time performance was around 86 per cent. At the height of the industrial action, which included stop-work meetings, Qantas on-time performance dropped to a low of 46 per cent. Throughout the campaign, Qantas on-time performance averaged 61 per cent.
The action ceased two weeks ago but Qantas on-time performance is currently running below 50 per cent as the backlog of repairs continues to grow. Jetstar on-time performance sits at 70 per cent and Virgin maintains an average of 76 per cent.
The licensed engineers had implemented low level overtime bans on working on days rostered off. According to ALAEA figures, the maintenance defects backlog of work to be done on aircraft has increased since the commencement of the overtime bans: 60 per cent in the first week; a further 25 per cent in the second week; 20 per cent more in the third week and an additional 16 per cent in the fourth week.
The effects of the overtime bans have illustrated just how close to the bone — if not into the bone — Qantas maintenance capability has been cut by its engineering management.
As the "new broom", Joyce has the opportunity to have a clean sweep of Qantas engineering executive management and then to put what is left of the maintenance side of the business back together.
The most immediate challenge he faces is to get Qantas forward bookings into a healthy state. That won’t happen until questions over aircraft reliability and safety are resolved.
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