The record $2.84 billion net loss at Qantas, the worst in its history, has been slammed by unions and analysts, but has given hope to investors.
The billion-dollar figure dominated headlines, despite a much better than expected underlying pre-tax loss of only $646 million, which buoyed the company’s stock price this morning.
Transport Workers Union national secretary Tony Sheldon said the result is a failure “in anyone’s language”.
“This board is made up of miners, lawyers, tobacco executives, people without airline experience.
“Quite clearly there’s a lack of management, and there’s a lack of investor vigilance on how this company is operating,” Mr Sheldon said.
“We’ve been told that the next big decision was the one that was going to turn the airline around. It’s failed to. All we’ve seen is the next big loss.”
Australian Services Union assistant national secretary Linda White said the announcement contained no plan for a return to profitability, and was yet more blame shifting from the board.
“What we see is Alan Joyce and the board blame everyone else. The reality is that the airline industry has always been a difficult business in Australia, but Qantas was one of the most successful in the world, so what’s the difference? It’s the CEO and the board,” Ms White said.
“It’s time for Alan Joyce and the board to go,” she said.
ASIC called to action
The result also triggered a complaint by Senator Nick Xenophon to the corporate regulator about whether Qantas has breached it responsibilities to the share market.
“Qantas has admitted to me via a Senate inquiry process that it has had commercial-in-confidence briefings with institutional investors,” Senator Xenophon said. Under corporate rules, companies must publish information relevant to share prices so that all shareholders have equal access to the information.
“My question to ASIC is whether this breaches Qantas’ obligations in terms of continuous disclosure to the share market.”
Senator Xenophon said he was curious why institutional investors had not “made a squeak” about the crisis in Qantas.
“You would expect them to be baying for blood,” he said.
Joyce’s upbeat outlook
In today’s press conference, CEO Alan Joyce said there was “no doubt” that the loss was “confronting”, but remained upbeat about the company’s future.
“[W]e have now come through the worst,” he said, referring to the thousands of slashed jobs and other deep cuts to the airline’s operating costs.
So effective were these cuts, said Mr Joyce, that the company will post an underlying profit before tax in the first half of 2015 – a claim treated with scepticism by analysts.
Qantas attributed the loss mainly to external factors, such as record high fuel costs, weaker demand, and lower consumer confidence.
While Australian Shareholders’ Association chairman Ian Curry agreed that external factors played a part, he attributed the majority of the problems at Qantas to a board that has failed to understand the marketplace.
“They’re blaming fuel costs, but they are common to all carriers, and they still have a very high [debt] level. Even with interest rates where they are, that’s a problem,” he said.
Australian Licensed Aircraft Engineers Association federal secretary Steven Purvinas was more scathing in his criticism, calling for the removal of both the CEO and Chairman Leigh Clifford.
“What Qantas really need to do is source some people to sit on the board who actually have some aviation experience. Here we have a CEO of an airline who was heavily involved in the failure of ANSETT and now looks like he’s going to be sending Qantas down the same path,” Mr Purvinas said.
The Australian and International Pilots Association president Nathan Safe also blamed the Qantas board. He said cuts were the “easy” option for management, and urged the airline to learn from past mistakes and strategically invest in aircraft for future growth.
“Qantas management has got this badly wrong since privatisation, primarily through poor aircraft choices. Neglecting to purchase fuel-efficient B-777s was foolish and has cost the airline dearly. Qantas literally cannot afford to repeat the mistake,” Mr Safe said.
Untenable for Joyce?
Despite forgoing a pay rise and freezing bonus payments for other executives, CEO Alan Joyce has still suffered the bulk of this morning’s criticism.
Australian Shareholders’ Association chairman Ian Curry said the board must now either dump Mr Joyce or back him for the next two or three years.
“I think Alan Joyce has probably got to be accountable for the next year or two, but he certainly shouldn’t be getting any rewards for what’s been happening,” Mr Curry said.
University of New South Wales marketing professor John Roberts told The New Daily that much of the $2.8 billion loss may be creative accounting.
“If the news is going to be really bad, then lets try and get all of the bad news out of the way,” was probably what the board were thinking, according to Professor Roberts.
While this might have been clever bookkeeping, it was still a “very, very poor” result and may have a negative impact on customer loyalty, he said.