From punch bag to saviour: Joyce’s rise echoes Aussie airlines’ rebirth

Canberra / Bloomberg

It’s tough to overstate the tide of troubles that faced Alan Joyce, the chief executive officer of Qantas Airways Ltd., just two years ago.
Losses had ballooned amid a capacity war with Virgin Australia Holdings Ltd. and its foreign backers. Australia’s government wouldn’t guarantee Qantas’s debt, which was junk- rated at the time. The airline’s share price wallowed near an all-time low and thousands signed a public petition for Joyce to be sacked.
Now he’s pulling off one of the fastest turnarounds in Australian corporate history.
Qantas stock has almost quadrupled and the airline is set for a record profit this year. Market conditions are indicating an encouraging run. Next week, Joyce may announce another cash return to shareholders, cementing his transition from embattled CEO to investor darling.
“It is a remarkable result,” said Neil Hansford, chairman of strategic Aviation Solutions, a consultancy firm based in Nelson Bay, north of Sydney, that specialises in business turnarounds. “Joyce was the punch bag for the media. Now that the airline has turned, he deserves the credit.”
Underlying pretax profit will jump to A$908.7 million ($645 million) for the six months to December 31 from A$367 million a year earlier, according to the average of three analyst estimates compiled by Bloomberg. Qantas said on December 15 it expected pretax earnings of A$875 million to A$925 million, as Joyce’s turnaround programme, rising sales and lower fuel prices take effect. The company reports on February 23.

Flying Kangaroo
The airline nicknamed the Flying Kangaroo is generating so much free cash flow — more than A$1 billion in the fiscal first half alone — it could also announce a A$500 million stock buyback, Morgan Stanley said in a February 9 report. The Sydney- based airline handed back A$505 million to shareholders as recently as
November.
A Qantas spokesman declined to comment on Joyce’s position or the airline’s results before earnings are released.
While Qantas shares have climbed 59 percent – through Wednesday – from when Joyce took the helm in November 2008, it hasn’t been an easy ride. In August 2011, he said he wanted to set up a premium carrier in Asia, but talks with Malaysia Airlines collapsed within months. In 2012, he oversaw the airline’s first full-year net loss since it listed in 1995, amid the costs of industrial disputes and a record fuel bill.
Qantas hasn’t paid a regular dividend since 2009.

Joyce unveiled his plan for Qantas on February 27, 2014: freeze wages, chop A$2 billion in costs, and sell or delay the delivery of some 50 planes. One in seven workers would be axed.
Independent Australian Senator Nick Xenophon was already calling for Joyce and the Qantas board to resign and shoulder the blame for losses, and almost 5,000 people signed an online petition calling for the CEO to go. Many hadn’t forgotten that Joyce left about 70,000 passengers stranded when he grounded the fleet in 2011 to tackle a labor dispute.
Within months, the recovery plan started to bear fruit as Joyce worked his way through 5,000 redundancies and wrote down the value of the fleet. In August 2015, Qantas reported its strongest full-year earnings since Joyce took over in 2008, and said it would buy eight Boeing Co. Dreamliners.
Qantas shares, which dropped below A$1 in December 2013, on Thursday added 0.8 percent to A$3.95 at the close in Sydney. The stock will reach A$4.85 in the next 12 months, based on analysts’ estimates compiled by Bloomberg.­