Can Joyce navigate a strategy superstorm?

The pre-emptive strike for Qantas by a group of private investors threatens to destabilise the airline further and disrupt its plan get its mojo back.

The flying kangaroo might have lost its bounce, but it seems to be heading into another bumpy ride. The latest episode in the saga involves the old guard of Qantas, comprised of former chief Geoff Dixon, former executive Peter Gregg, and newcomers including venture capitalist Mark Carnegie, trucking magnet Lindsay Fox and advertising guru John Singleton.

It was reported by the Fairfax press over the past week that this group of investors are seeking a change of strategy in Qantas, and have put their money where their mouths are by investing in a strategic stake in the airline believed to be between one and two per cent of the shareholding. The reports suggest that Gregg and Carnegie held briefings a few months ago with a selected group of investors and unions disaffected by the airline’s strategy and leadership, and called on their support for an alternative strategy for the airline.

Interestingly, this group contains some of the same people whose abortive attempt to take over Qantas by private equity through a leveraged buyout in 2007 would have landed the carrier into a tailspin with investors losing just about everything when the GFC hit a few years later.

What is intriguing about these reports is that the series of briefings included unions representing Qantas pilots, engineers and ground workers to challenge the current chief executive’s strategy for the airline. After what can only be described as industrial warfare, this approach by the old guard would seem like the light on the hill for Qantas unions.

Just at a time when Qantas needs to regain its former mojo and focus on staff engagement and customer service to match new airline partner Emirates, it would seem this pre-emptive strike by former executives is more than just a distraction.

The implications for companies and industrial relations could be significant. If true, the new tactic of destabilisation does nothing to improve effectiveness or efficiency and draws attention away from the airline’s main game of focusing on greater engagement with its staff as a means to improve the customer experience.

This requires leadership to forge direct relationships between managers and employees so the spirit of Australia, which Qantas promotes, can ring true once more. It also means unions and employers working in a form of partnership to tackle the challenges and costs faced by legacy airlines such as Qantas. The heavily unionised Northwest Airlines in North America has provided successful examples of how this can happen.

Dixon and co have so far provided little in the way of how they are going to approach these issues, apart from reports that suggest focusing on Asia by floating Jetstar’s Asian franchises, and partially selling off Qantas’ very profitable Frequent Flyer program. While such a strategy would bring billions of dollars in cash, it would do little to improve the fundamental issues of reducing cost and improving efficiency so as to compete in a highly competitive market.

Speculation in taking advantage of a weak share price is not a long-term strategy. Sustainable share value will only come about by focusing on the core value of the company, its people. And only by direct engagement with its staff will Qantas be able to create that value for all investors, employees and unions.

Emirates president Tim Clark reportedly backed Joyce’s strategy by stating that Joyce was addressing the legacies of his predecessors. A message from the head of one of the most successful airlines in the world should not go unnoticed.

One thing is for sure: this seems to be more of a case of the devil you know, rather than the one you don’t. And while Joyce might be hanging on a wing and prayer, it is clear there is more turbulence to come for Qantas in the year ahead.

Paul Gollan is associate dean of research and professor of management in the Faculty of Business and Economics at Macquarie University.


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