Qantas scandals show bosses are boys in a bubble

OPINION

With Alan Joyce’s ignominious departure from Qantas earlier this month, focus is now turning to the airline’s chairman and board.

Shareholders will have a say at the airline’s annual general meeting in November.

Investors
are wondering why the board let Qantas CEO Joyce get away with so much.

Chairman Richard Goyder and his mates on the board have presided over a period when Qantas was the most complained-about business in Australia, when it allegedly sold tickets to 8000 flights it had already cancelled, and when it made it near-impossible for customers to redeem half a billion dollars worth of Covid-era refunds.

The latest blow to Qantas was a High Court ruling that it had illegally sacked 1700 ground crew in the midst of the Covid crisis so it could outsource their jobs.

This was the third time the matter had been to court – Qantas had lost twice before and appealed.

But perhaps most rankling for investors is the way the board signed off on Joyce’s enormous salary and bonus, and a questionable share sale.

When Joyce left Qantas at the start of September, he walked away owed A$24 million ($25.9m) in salary and bonuses, despite leaving an airline with its reputation in tatters, two court cases that could cost it hundreds of millions of dollars and a looming A$15b ($16.2b) bill to upgrade the ageing fleet he ignored for so long during his tenure.

The board has responded to shareholder and customer anger by clawing back the short-term bonuses of executives.

For Joyce, this means A$2.3m ($2.48m)in short-term bonuses are being held back. This leaves him with A$21.4m ($23m), which is still a hugely generous pay packet for someone who leaves behind such a mess.

Some A$10m ($10.8m) of that is subject to delay or clawback, depending on whether the courts find that Qantas did indeed knowingly sell tickets to flights it had already cancelled.

This is unlikely to assuage investor and public anger. Nor will an apology and a promise to do better on Friday from new CEO Vanessa Hudson.

That’s bad enough, but what really has investors asking questions is Joyce’s recent share sale.

The chief executive sold 90 per cent of his holdings of Qantas stock on June 1 – but could only do so with Goyder’s approval.

Joyce sold A$17m ($18.4m) worth of shares at the top of the market, so it was certainly a lucky bit of timing on his part.

Investors who have stuck with the airline have not had the same luck. Shares in the airline have fallen about 15 per cent since it announced a record A$2.4b ($2.6b) profit last month.

When Goyder approved the share sale, Qantas knew it was being investigated by the Australian Consumer and Competition Commission (ACCC) for selling tickets on flights it had already been cancelled. The airline argues the investigation had not yet “crystallised into legal action”.

But given there was a strong chance it could have, Goyder should have told Joyce to wait.

At the same time as these two fellows were chatting about millions in share sales, the Qantas lawyers were busy working up its third defence for sacking 1700 baggage handlers and cleaners. We can reasonably assume that none of these workers had $17m Qantas share portfolios to fall back on.

Even leaving aside the ACCC investigation, this should have given Goyder pause for thought. The sackings could cost the airline as much as A$200m ($216m) in fines and compensation.

And there are questions about why Goyder and other directors didn’t rein Joyce in earlier. Board members are of course members of the Qantas Chairman’s Lounge, a free and invitation-only airport lounge with which Qantas curries political and corporate favour.

Chairman’s lounge members can ring a special hotline just for them and speak to an operator who will sort out all their Qantas problems – book flights, provide refunds and hand out free upgrades.

Nonetheless, they must have had some inkling that the poor suckers they have for customers were growing increasingly furious about last-minute flight cancellations, flight delays and the near impossibility of getting a refund from Qantas, and the many hours spent on hold.

Were they all living in such a bubble that no one – a neighbour, a nephew or an Uber driver – had mentioned the woeful Qantas performance to them?

And it’s the board who backed Joyce and his team to spend tens of millions of dollars in legal fees to fight and lose its illegal sacking case three times.

It’s a director’s job to inform themselves of these sorts of things.

The Qantas directors have failed to do this and the board should be cleaned out, starting with Goyder.

But Goyder doesn’t appear to have learned anything from the past few months.

“The latest read I’ve got on that is that people want me to continue to do the role and I think I’m well suited to it,” he told the ABC last week.

“While I retain that confidence I’ll get to work and do the things we need to do to deal with some of the issues we’ve got at the moment.”

It sounds like he’s still living in his bubble.

Christopher Niesche is an Australia-based financial journalist with 25 years’ experience on Australia’s major newspapers, most recently as deputy editor of the Australian Financial Review.