Alan Joyce: "At the back of your mind, you always know that what you're after is making sure you protect as many jobs at Qantas as possible." Picture: Nick Cubbin Source: Supplied Virgin CEO John Borghetti is fiercely battling Qantas for the business market. THERE must have been a time when Alan Joyce wondered what he had got himself into. His appointment five years ago as chief executive of Qantas came in a decade of constant shock in the aviation industry. And as he took over, in November, 2008, the airline industry was about to be rocked by the global financial crisis. "All we need now is a plague of locusts," he observed drily in 2009. By October the following year, a plague of locusts had duly arrived. The fresh-faced Irishman recalls the comments with a laugh as he reaches his fifth anniversary in the job. He has weathered a global financial crisis, volcanic eruptions, an Airbus A380 engine explosion, industrial action, increasing competition from foreign players on international routes and Virgin Australia on domestic routes as well as the airline's first financial loss since privatisation. His survival in this tough environment, while at the same time coping with the personal crisis of aggressive prostate cancer, demonstrates an underlying toughness as well as a savvy tactical flair that was evident in his unprecedented move two years ago to ground the airline and bring a crippling industrial dispute to a head. He has lost none of his enthusiasm and remains convinced that he will achieve his goal of setting up Qantas for a sustainable future with all its major units profitable and mainline international growing again - subject, of course, to the usual caveat about unpredictable external shocks. But his self-professed "glass-half-full" optimism makes way for a serious side as he outlines what he sees as the hardest challenge of his first five years, the significant restructuring he saw as essential to the airline's survival. "And that's not one event; it's an accumulation of things that were probably there," he says. Having to make people redundant, pulling off routes - it's bloody hard. It's not the thing that you want to do. What Joyce would rather be doing is growing the company, buying more aircraft and hiring people, but he says this was impossible given the issues facing Qantas as a business. "Having to close down Tullamarine heavy maintenance base and make those people redundant, having to pull out of routes and make people redundant, that is horrendous and that's been the hardest part of the last five years," he adds. But at the back of your mind, you always know that what you're after is making sure you protect as many jobs at Qantas as possible, and making sure that Qantas is around for the next 90 years. And if you don't make the tough decisions, make the tough transformation, you're endangering all of that, and that's what gets you through it, I think. Rising fuel costs, the global impact of the financial downturn and increased competition have made the world even tougher over the past five years. Just before Joyce took over, in the year to June 2008, Qantas had reported a record profit before tax of more than $1.4 billion on revenues of about $16bn and a net profit after tax of $970 million. Last year its underlying pre-tax profit, which takes in accounting changes made in 2010, was $192m on similar revenues. Net profit was $5m, dragged down by an underlying loss before interest and tax of $246m at its international unit, an expanding fuel bill and the $100m cost of the carbon tax. On the plus side, the group, including Jetstar, now services 255 destinations compared with 151 in 2008 while passenger numbers have gone up from 38 million to more than 48 million. And its three other big drivers remain profitable, with its domestic operations reporting underlying earnings before interest and tax last year of $365m, followed by the $260m earned by Qantas's frequent flyer business and a $138m contribution from Jetstar. A 26-year veteran of the aviation industry, Joyce says resilience and the ability to cope with the increasing tempo of change come with the territory, particularly with a group such as Qantas. But outside views of Joyce's performance are mixed; a common theme is the lack of investment in the loss-making Qantas International, which has been hammered by intense competition from Asian and Middle Eastern airlines. "I think he's done a reasonable job under very difficult circumstances, fighting often against things that were a bit beyond his control," says a financial analyst, who does not wish to be named. And if there was to be criticism I would say that maybe he let the Qantas premium brand lose a bit of its gloss and [has] not really cashed that in as much as he could have. Unions take a dimmer view. Former Australian and International Pilots Association president Barry Jackson accuses the Qantas chief of pursuing a "divide and conquer" strategy with staff and argues the lack of investment in international operations has contributed to its problems. "It wouldn't be a positive assessment," Jackson says. He was given ample opportunity to work constructively with his staff and chose not to. I don't think I'm underestimating it by saying the current pilots' engagement is probably the lowest it's been from the mainline pilots and that might be broadened across the rest of the group. For a man who took on the mantle of antichrist in the eyes of some union officials, however, Joyce remains affable, with a keen Gaelic sense of humour and the ability to connect with people. His public appearances are more tightly scripted these days and his rakish curls have been replaced by a more severe executive cut in line with his raised status. Yet the boy from the working-class outer-Dublin suburb of Tallaght is never far away. He still mangles the language in an endearingly Irish way - he once joked that he had been told by his public relations team to avoid the word "third"- while still managing to get the message across. He remains a keen family man, something he says was reinforced by the brush with aggressive prostate cancer (a recent examination showed he has remained clear of the disease). He took his parents around Ireland during July and Skypes them every week. He also stays in close contact with two brothers in Ireland and another who now lives in Melbourne. "We're a very close family," he says. We always will be and it's great having the support of the family that you know you can rely on. Joyce has made some radical changes, including a surprise restructure in May last year that split operations into international and domestic with their own chief executives. It saw the departure of Jetstar chief executive Bruce Buchanan and new boss Jayne Hrdlicka take over the low-cost carrier group. Simon Hickey, who was running the frequent flyer business, was appointed to head up Qantas International, with Lesley Grant taking over his old job. Joyce's background in maths and physics, as well as his previous experience in Aer Lingus, Ansett and Jetstar, have allowed him to take an analytical approach to the job. He believes managers should be flexible enough to admit when they're wrong and repair the situation before too much damage occurs. And while he may foster a collegiate approach to executives working together, he adds that there are some decisions that only a chief executive can make. Sometimes I enjoy that. But you always know that buck stops with the CEO and you have ultimate accountability and that's the way it should be. That was something the airline's engineers, pilots and ground handlers discovered. Joyce changed Qantas forever and rocked the Australian industrial relations system when he grounded the airline in October 2011, forcing the Labor government to declare long-running disputes with three unions and call in the industrial umpire. Joyce has always maintained he had no choice but to take the drastic measure because of the ongoing damage from the disputes, particularly those being waged by the Transport Workers Union and the Australian Licensed Aircraft Engineers Association. He saw the alternatives as allowing action that was destroying the brand and killing customer loyalty or ceding to union demands that undermined management's ability to make the significant changes needed to ensure the airline's future. It was never, he says, a hard decision because the other two alternatives would have been "just terrible for Qantas, its employees and its customers." "Since then, we've had the highest level of engagement we've had in our history, particularly from customer-facing staff," he says. We've gone through two years of no industrial action and we've now signed 17 EBAs [enterprise bargaining agreements] over that period of time, the ASU [Australian Services Union] being a big one recently which was voted up by 97 per cent. So we are in a different environment. Joyce believes the balance of power in the industrial relations system swung too far to the left under Labor and hopes it will come back to the centre under the Coalition. He says Qantas has lobbied the federal government for several changes in IR laws including a more sensible stand on what issues can be negotiated in an enterprise agreement. Overall, he says, IR should provide a stable backdrop for sensible negotiations. It is not good for either side, he says, if the pendulum swings too far either way. He also rejects criticism he has presided over a shrinking airline, noting Jetstar now operates twice as many weekly flights as it did five years ago and has added 22 destinations. "There are different growth profiles in different groups," he says. In the past five years the airline's Airbus A380 fleet has expanded from one to 12 aircraft. As a whole, the group added 80 planes with the average age of the fleet, of 7.9 years, its lowest in two decades. Asked about his proudest achievements over the past five years, the airline boss nominates the alliance with Emirates, Qantas's ability to defend its domestic market share in Australia and the growth of Jetstar in Asia. In Australia, the domestic market has proved a fierce battleground as Virgin Australia's John Borghetti, one of Joyce's rivals for the top job five years ago, has stepped up his pitch for business and government travel. Virgin has introduced business class and boosted capacity by adding planes, introducing widebody Airbus A330 aircraft and replacing Boeing 737s-700s with the bigger 800s. It has also bought a regional network with a takeover of Perth-based Skywest and a low-cost arm through its 60 per cent shareholding in Tigerair Australia. However, the determined Irishman is not ready to give ground to his equally resolute Italian-born counterpart. While Qantas's earnings from its domestic business were down 21 per cent last year, Joyce notes it was the only domestic airline to make a profit and it retained its share of the corporate market while topping the industry in on-time performance with a record customer satisfaction. He argues that Qantas is now in "a very strong position" in every segment of the domestic market: Qantas Domestic, Jetstar, QantasLink and a growing fly-in, fly-out business that aims to capture 40 per cent of the market from what was effectively a standing start. Joyce is enthusiastic about Jetstar's expansion into Asia, a move started under his tenure as the low-cost operation's chief executive and expanded under Buchanan. The airline is consolidating its network of joint ventures in Singapore, Vietnam and Japan. It is also pushing to get regulatory approval for a joint venture in Hong Kong, something Joyce remains confident will happen. The Qantas boss labels as amazing that "a little Aussie airline which only started 10 years ago" is one of the biggest brands in Japan, with a half billion dollars in business created in the past year, and has a big presences in Vietnam and Singapore. The Qantas-Emirates alliance, he argues, allowed the Australian airline to cut its loss-making route to Frankfurt while opening up more than 30 destinations in Europe and enabling it to concentrate on the big growth market of Asia. The customer reaction to that has been fantastic and the speed with which our team delivered on that, I've been blown away by. While seen by some as a bold decision designed to cut Qantas International's losses in a fiercely competitive global market, it remains a radical move that has been criticised by Joyce's predecessor and former mentor, Geoff Dixon. Dixon and others have expressed concern that Qantas would be subsumed by the Dubai-based juggernaut. Joyce's anger at Dixon's comments spilled over into a rift with Tourism Australia, which Dixon chairs, with Qantas withdrawing its funding support for the organisation and redistributing it to state tourism bodies. Looking to the next five years, Joyce is confident Qantas's loss-making International operations will break even by 2015 and expects the airline's huge frequent flyer scheme to go "from success to success" after its membership expanded to 10 million in the past five years. So how long will Joyce stay on in the Qantas top job? He's not entertaining any ideas of retiring, saying he remains passionate about Qantas, its history and its people. "I'm very young still," he says. It's not as if I'm thinking about retirement and I'm very happy to continue in this role and the board's very happy for me to continue in this role.