Earlier this week, union official Steve Purvinas shared a unique perspective on the performance of Qantas. He said the turnaround of the national carrier was relative only to the financial loss presided over by the same management. And, therefore, any performance pay based on that turnaround was misplaced.
So, in a nutshell: if you’re on deck when there’s a problem – and you fix it – it was probably your fault to begin with.
There’s a lot wrong with this analysis but a few points in particular need to be set straight.
Firstly, consider the external factors that drove Qantas to its first financial loss in 2014.
The price of oil was twice what it had been in the mid-2000s.
Overseas investors had injected hundreds-of-millions of dollars into our main domestic competitor, Virgin, to fund a capacity war against us.
And there was a huge increase in flights from Middle Eastern and Chinese airlines that completely changed the aviation market in this country.
Qantas management was faced with a set of challenges that meant ‘business as usual’ was not an option. So, we reshaped the company to put it on a much stronger footing.
At the time, many said it was a false dawn. That it was really the subsequent fall in oil prices that had driven the Qantas turnaround, not the structural changes. Since then, our annual fuel bill has increased by more than $600 million – and yet we are still strongly profitable in an aviation market that looks very different to what any previous management had to deal with.
You only need to look at other airlines to see that financial success in this environment isn’t a foregone conclusion. In the past decade, Qantas has posted one loss and nine years of strong profits, including several record results. Our main domestic competitor has only had one year of profit in that time.
Mr Purvinas also criticised Qantas’ fleet, saying it’s a lot older than our competitors’. What skews the numbers is adding the older aircraft that we use almost entirely for FIFO charter operations – not something most customers would experience.
In the past decade, we’ve taken delivery of around 180 new aircraft and retired some 100 older ones. These numbers will keep increasing in the next 12 months, as we receive more Boeing Dreamliners and retire the rest of our 747s.
At the end of the day, a company should be judged on how well it balances the interests of customers, shareholders and employees.
Qantas did have an 18 month wage freeze for employees, and a two year freeze for executives, when times were tough. Since then, we’ve set aside $340 million in non-executive bonuses for the turnaround and record results. That’s on top of 3 per cent annual wage increases. This may be one factor behind the highest levels of employee engagement in the company’s history.
Qantas customers are benefiting from $2 billion of investment each year – things like inflight WI-FI, upgrades to aircraft and new lounges.
It’s why our customer satisfaction has also reached record levels.
And by next month, our shareholders will have received almost $5 billion through dividends and buybacks since 2015.
It’s these same shareholders who decide what CEOs are paid. And in Qantas’ case, the strong performance of our share price – which rose from about $1.20 to over $6 – has naturally increased the value of bonuses that are paid almost entirely in shares. If management got it wrong, it could have easily gone the other way.
The aviation industry is very different now compared with 10 years ago. And so is Qantas. That’s a good thing, and we intend to keep making it better.
