The Missing Part Of The Qantas Puzzle Is Where The Buck Stops

Qantas CEO Alan Joyce (Photo: Bloomberg)

Missing from communication from Qantas about the thousands of jobs to be cut and the money lost is language around responsibility.

And there’s a lot of communication: 108 pages lodged with the ASX, a press conference with a long statement followed by questions and answers, and later a series of individual interviews including television.

The closest Qantas comes to finding a relationship between management and the losses, or an apology for the result, is that the situation is “unacceptable”.

Describing the $252 million loss for the six months to December, chief executive Alan Joyce said: “This is an unacceptable and unsustainable result. Comprehensive action is needed in response.”

A favoured management school strategy for communicating bad news is to first apologise, giving implied responsibility, and then quickly outline how the issue will be fixed.

That way the elephant in the room, the connection between the bad news and the company management, is back in the closet almost before it’s been released.

During today’s press conference to explain the loss and the major changes need at Qantas, Joyce was asked about his future at Qantas. “Is there any discussion regarding your own position?” a reporter asked.

Joyce replied: “I am absolutely committed to Qantas.”

He gave a description of what had brought about the change in market conditions which resulted in the loss.

No mention of management. The problems, according to Qantas, are external ones, apparently beyond direct control, but ones which need to be met with extensive changes within the airline:

Capacity deluge: While Qantas capacity has grown 2.9% since 2009, competitor capacity has grown by 46%. This year alone international market capacity growth in Australia will be 9%. Locally, Virgin has grown capacity 18% since July 2011 compared to 8% by Qantas. This deluge is being led by state-owned airlines, some of whom have lower costs including labour.

Higher fuel bills: This is expected to be a record $4.6 billion in 2014

A distorted playing field: Singapore Airlines, Air New Zealand and Etihad have government ownership or majority government ownership. Virgin Australia, a majority foreign-owned company, has all the rights of an Australian carrier.

Qantas Sale Act: This is what Joyce says means Qantas is fighting with one arm tied behind his back. While Virgin Australia can take capital from its foreign owners, foreign investment in Qantas must be under 50%. And Virgin Australia can use that capital, around $300 million, to build capacity and take market share from Qantas.

Transformation: The work at Qantas in the last five years (since Mr Joyce was appointed CEO): unit costs down 19% over four years; average aircraft fleet age of a young 7.6 years; consolidated engineering bases to one from three; modernised maintenance practices; non-core assets ahve been sold.

Nothing about management except to say there will be no pay rises or bonuses for executives until Qantas is back to profit.

Joyce did say employees had worked hard and the job cuts were not a reflection on their commitment.

Everyone accepts the market is volatile, that the airline does need to take action, and that its regulatory setup is a competitive disadvantage. But with Qantas management being such consistent targets of public criticism, the absence of reference to themselves is all the more apparent.

Part of this might be down to the unusual politics surrounding Qantas right now: apologising can be an admission of sorts, and the public won’t stand for the government backing a company when its management says it could have done things better.

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