Last laugh for Joyce in a Qantas-Dixon battle?

The $30 million deal Qantas has unveiled with the New South Wales to promote tourism in the state illustrates the lingering bitterness within Qantas towards its former chief executive Geoff Dixon and his role in the short-lived activist investor group that tried to generate interest in an alternate strategy for the national carrier last year.

Last November Qantas’ Alan Joyce mounted a fierce attack on Dixon and his fellow agitators, Mark Carnegie, John Singleton and former Qantas chief financial officer Peter Gregg for trying to undermine him and the alliance with Emirates (which was then still waiting for Australian Competition and Consumer Commission approval) in briefings with Qantas’ unions and investors.

The role of Dixon himself within the group appears to have been relatively low-key (at least in relation to the presentations to unions and investors) but that he was involved at all incensed Joyce and his board, who retaliated by announcing they would withdraw their planned three-year $44 million funding for Tourism Australia when the current contract ends on 30 June.

Dixon is chairman of Tourism Australia, which Qantas saw as an obvious conflict, although the Tourism Australia board backed Dixon, saying the conflicts were manageable.

The consortium, after receiving no meaningful support from the unions or, more particularly, institutional shareholders, subsequently sold their relatively modest shareholding at a substantial profit but the ill-feelings linger.

Only last week Qantas’ chairman, Leigh Clifford, said he and “a lot of people in Qantas” had been disappointed by what happened last year, saying it was inappropriate for past executives to be speaking to shareholders and unions and heavily criticising their former employer’s strategy.

Qantas, in announcing it would pull its funding from Tourism Australia, said it would re-direct it to state tourism bodies and the deal with New South Wales, under which the airline and the state will jointly fund the three-year program, makes good on that threat.

While Virgin Australia was quick to double its contribution to Tourism Australia, from $6 million to $12 million over three years, the loss of Qantas’ funding will impact the national body it had supported for decades.

Virgin has alliances with Etihad Airways, Singapore Airlines, Air New Zealand and Delta Airlines so it is conceivable that over time Tourism Australia could end up heavily supported by and supporting Qantas’ main rivals.

The Qantas support for Tourism Australia has been linked to the decisions of successive federal governments to deny Singapore’s long-term lobbying efforts to try to obtain ‘fifth freedom’ rights that would enable it to fly via Australia onto the trans-Pacific route that has been a lucrative route for Qantas, adding Australian passengers in competition with Qantas in the process.

So far, however, there has been no suggestion that the breakdown in the relationship between Qantas and Tourism Australia has altered the federal government’s position on those rights.

The irony of the ginger group’s attempt to destabilise Joyce and his Emirates alliance strategy last year is that, whether through their efforts or, more likely, the progress of the alliance through to its approval by the ACCC, the Qantas share price rocketed along. That enabled it to walk away with a handsome profit.

After bottoming out at just under $1 a share last year Qantas shares have risen steadily in line with the progress of the alliance, with a recent peak above $1.80 a share earlier this month.

The group’s institutional investors are very supportive of the alliance, which Qantas has said has already sparked a major surge in forward bookings, believing it is a key element of Joyce’s attempt to return Qantas’ loss-making international business to profitability.

Apart from opening up a multitude of routes into Europe the alliance is enabling Qantas to re-deploy capacity into Asia on schedules that are tailored to business travel into and out of the region rather than as a comfort stop on the flight path to London.