Flight Path

Thursday, April 1, 2010 - 09:00

Qantas CEO Alan Joyce has his work cut out maintaining the premium Qantas brand in a cut-throat market. By Georgina Jerums

Most mornings, Qantas boss Alan Joyce heads off from his apartment at The Rocks and pounds the pavement for eight kilometres around the Sydney Opera House before work. A jogger's high - and getting stuck into books by British evolutionist Richard Dawkins - are the 43-year-old's way of "keeping stress at bay" at work. In his case, work involves managing 35,000 staff during aviation's worst downturn in history.

Such demands don't faze Joyce, though. He's mad for all things aviation. "The first time I flew - you may think this is very strange - I was 22," he says, an Irish lilt belying his Dublin upbringing. "So I'd never had a passion for aviation until I started in the business. But no other industry offers the diversity of working with technology, revenue, check-in operations, and employee range - pilots, cabin crew, ground staff, lighting technicians, engineers, marketing specialists and financial specialists."

Which is not to say managing the world's longest running airline (turning 90 this year) whose 237 aircraft carried 38 million passengers from 2008 to 2009 is without challenges. Try rising fuel costs, fluctuating currencies, safety blips, pay disputes, undercutting from low-cost operators and a slump in lucrative business travel, for starters.

Nonetheless, Joyce was under no illusion when he took over the Qantas controls from Geoff Dixon in November 2008 that it was going to be all clear skies, given he came in during the global recession when airlines faltered, as companies cancelled non-essential business travel and households put off holiday travel. "I came in ready and willing because Qantas is such a great brand," he counters. "It's so competitive and it's probably the best able to cope with problems than anyone."

He should know. Armed with a management sciences Masters from Dublin's Trinity College, in 1988 Joyce joined Aer Lingus and worked in operations and fleet planning, moved to Australia in 1996 to take up a job with Ansett, became Jetstar CEO from 2003 to 2008 and then landed his current role. He's familiar with the "constant shock syndrome" of airlines where adaptability is crucial to deal with world economic and geo-political events. Joyce's executive team, for instance, meet monthly for a day-long session to thrash out contingencies: a plan for a "double dip" recession, a plan for a sudden rise in business travel, a plan for a slow upturn.

"We're all about flexibility," says Joyce. Yet he does veer towards optimism when describing Qantas positioning itself as a premium brand (in addition to spruiking the low-cost appeal of Jetstar, which it also owns).

"Some people talk of the death of the premium brand. We're absolutely of the view that the premium market is not dead and it will recover. We're seeing some strength returning to the domestic market. The international market is pretty weak but we do expect it to recover. We have a plan to make sure we manage our way through the GFC so that we take advantage of the upturn when it does take place."

Tough calls
As profits tanked last year, Joyce's prime responsibility was to cut costs and that included axing 1750 jobs, 590 in management. "We reduced management ranks by 20 per cent," says Joyce. "They were not people leaving because of performance issues, we had to remove them from the organisation because we had to cut back on our services given the GFC. That was probably the toughest single thing for the management team during the last 18 months."

Union negotiations over engineer salaries and "having to cope with demand for pay increases that are way out of kilter with what the business can afford and standing our ground on that" is a current management task, as is re-engaging with employees in the light of wage freezes and a rise in casual employment. "Sometimes in the past, we've given the impression that we care more about shareholders than customers, or customers than employees," Joyce ventures.

To counter this, his 2010 strategy is to balance shareholder's needs with good customer service while keeping staff happy by constantly talking with them and leading from the front. "Employee engagement is not where we want it to be at Qantas, and we have to work on that," Joyce concedes. "You can never over-communicate with employees."

Having Hollywood contacts helps in that regard. "John Travolta [a Qantas-trained 747 pilot] will be doing a lot of work for us this year at functions with our employees," says Joyce. "We'll be spending a lot more of our marketing budget on our employees, not just on our customers. Because in that 35,000, there are a lot of advocates, and if you can get them out there muscling behind the organisation with their families, that'll probably have a bigger bang for our marketing dollar than anything else."

And how does he think shareholders perceive Qantas, following the rejected 2007 privatisation bid? "There is a lot of angst, but as far as we're concerned, we're a new management team and that's all history. Our strategy for the three key stakeholders is to focus on being the world's premium and low fares airline."

Executive match
A diverse executive team makes or breaks a CEO, and that's why Joyce looks for self-motivators who are at times willing to push business aggressively, take calculated risks and who manage time well and avoid chewing over decisions. He says Ansett had a culture of "analysis paralysis" and by contrast, Qantas has change management as "part of its DNA".

Collaboration must take place. "I talk about the team a lot because that's where the power of good management comes in," he says. "Don't be afraid of having frank discussions, but at the end of the day, be decisive and make sure you have a clear direction and that everybody's behind it. Once a decision has been made, make sure nobody's undermining it. That's one thing I really don't like and that's something at Qantas we won't tolerate."

Give feedback, too, because continuous performance management allows continual improvement of an organisation, Joyce adds. There should never be any surprises; people should know when they're doing a good or bad job and where they need to improve or focus.

And finally, never underestimate the strength of a board for diverse international market insights, notes Joyce, who gains advice from key board members such as James Strong (former Qantas CEO), Leigh Clifford (former Rio Tinto CEO) and John Schubert, (Commonwealth Bank chair).

Brand power
As former Jetstar CEO for five years, Joyce deflects claims he is bringing a budget image to the Qantas brand. He says it's an advantage to have worked with both brands, and points out that Qantas research indicates the public can easily distinguish the two brands. Joyce does, however, have regrets over cutting costs too much at Jetstar when he was CEO.

"We started with free seating; people could sit anywhere. It was absolutely the most efficient thing to do; low-cost carriers do it around the world."

Thing was, Australians hated the idea and market penetration suffered. "We waited too long to listen to the customers," admits Joyce, who eventually implemented reserved seating. The lesson: "when you're wrong, identify it fast and then fix it."