It may be some way off being loved again, and the ghosts of its tumultuous era may still linger, but the past year appears to have made a world of difference for Qantas’ revival – in the eyes of investors.
Shareholders who attended its annual general meeting in Hobart on Friday were in a markedly better mood than this time last year, with its share price up by more than 60% to trade just above the $8 mark.
One year ago, as Australia’s biggest airline emerged from pandemic disruptions to post record multibillion-dollar profits, shareholders delivered one of Australia’s largest-ever protest votes against executive pay, amid fury at a cascading string of scandals that precipitated the early retirement of its long-term chief executive Alan Joyce.
At the 2023 AGM in Melbourne, the company’s executive pay deal was overwhelmingly rejected, with 83% of votes cast against, setting up the prospect of a vote to spill the airline’s board of directors if the remuneration plans were voted down again the following year.
However, in Hobart on Friday, the 75% threshold of support was reached comfortably, which meant Qantas avoided a potential board spill.
“The shareholders can’t complain – sure they might get lower dividends, but it’s a phenomenal rise [in share price],” said Tony Webber, the chief executive of the industry analyst firm Airline Intelligence & Research and a former chief economist at Qantas.
“Their financials are clearly better, but they’ve achieved this by pissing off a lot of people … It’s still an active task to win back its reputation,” Webber said.
‘The ghost of Alan Joyce’
While investors’ appeared pleased with Qantas’ recent trajectory – aside from some complaints about the airline not paying dividends – the shadow of last year’s feisty AGM, in which former chair Richard Goyder was heckled, was never far off.
During questions on Friday, investors asked how severe the impact of the airline’s settlement with the consumer regulator – in which it will pay $100m in penalties and $20m in compensation for selling thousands of tickets for flights that it had already cancelled in its systems – would be.
They also raised questions about the hefty compensation bill for its decision to illegally sack almost 1,700 baggage handlers in 2020. Test case compensation amounts, determined by the federal court earlier this week, mean Qantas’ financial hit over this saga is now expected to exceed $100m, in addition to any court-imposed penalty.
There were reminders of the fiery scenes of last year. Investors had been limited to two questions each, but shareholder Chris Maxworthy made the case that he should be allowed to ask a third, because at last year’s AGM Goyder ordered his microphone be turned off.
“I feel the ghost of Alan Joyce in the room,” Maxworthy said.
In response to a handful of tense questions, the new chair of Qantas, John Mullen, often answered on behalf of fellow board members, in some cases protecting them from irate questioners who demanded certain directors speak for themselves.
Mullen also defended against a suggestion from an investor that Joyce’s final pay packet – a $21.4m package which had already been cut by $9.3m following a governance review which found considerable harm was done to the Qantas brand under his tenure – should be clawed back even further to just his base salary.
Brand repair ongoing
Mullen appeared to arrive at Friday’s AGM knowing that while the share price may be booming, optics were another thing.
“There is no pretending that last year was anything other than a very difficult year for Qantas,” he said in his opening address.
“You have our absolute commitment to learn from the past, correct mistakes quickly and ethically if they occur and ensure that we earn the trust and respect of all of our stakeholders, from government to customers to employees and to everyday Australians,” Mullen said.
Despite Mullen’s contrition over the decision to outsource ground handling, Webber, the former Qantas chief economist, thought the pain could have been worth it from a financial perspective alone.
“It is probably saving them money still overall,” Webber said.
The Australian Shareholders’ Association was against a board spill, citing the considerable change at the board level over the past year.
Its chief executive, Rachel Waterhouse, believed Qantas’ decision to commission the governance report into what went wrong at the airline was prudent, but said it was too early to tell if that will bring about substantial change.
“They’ve done a good job of having an independent review and throwing it out there for everyone to see, warts and all,” she said. “So, there’s a tick there but unfortunately they had to do it because of all the problems.
“It’s too early to know for sure whether everything is on the right track, but they have a very solid, experienced chair in there now,” Waterhouse said.
Qantas’ governance review, released in August, found that there was “too much deference” by the board to Joyce, who the report notes had overcome multiple past operational and financial crises.
The report also noted a lack of board focus on non-financial issues, employees and customers.
Progress on this front appears less advanced.
Research from polling company Roy Morgan found that Qantas’ reputation continued to slide in the June quarter, moving further up its distrust rankings. It is now the second-most distrusted brand in Australia, overtaking Facebook’s parent Meta.
While Qantas’ internal research conflicts with this and shows a slight improvement in its reputation, Webber said the legacy of Joyce’s decisions in areas such as fleet renewal – where he claims Joyce neglected refreshing aircraft to achieve short-term financial goals – mean that customers are still flying on comparatively older planes which are more prone to issues that lead to disruptions.
While new aircraft deliveries are set to pick up over the next year for Qantas, he stressed it was important for Qantas not to rest on decent financial performances and continue tangible improvements for customers.
Waterhouse agreed Qantas still needed to be watched closely and despite the rising share price, there are bigger issues to grapple with. “Culture and change takes time,” she said. “The reality is there’s just so many costs there and there’s still a lot of challenges.
“It’s going in the right direction but you wouldn’t want to get too excited just yet.”
