Corporate hero or union villain; who cares? When it comes to winning glossy magazine covers, Alan Joyce is without peer. The man is downright sultry too.
Those with a more discerning eye for glamour may quibble – and there are indeed many shots to choose from in the Qantas chief executive super-modelling portfolio – but we personally favour the classic elegance of the finger-sur-le-chin pose, one of Joyce’s later works.
You know the one: shades of Rodin’s Descartes, though the subject’s visage seems less introspective, or rapt in the eternal musings perhaps, than fixed in the distance, full of wisdom and purpose.
Here is the quintessential portrait of the visionary leader, a distinct counterpoint to some of the earlier Joycean works with their playful dancing eyes and sensual pouts.
But where are Joyce’s contemporaries? Why do we not see Brambles’ chief executive Tom Gorman reclining seductively across a stack of Chep pallets? Or the bewitching Elmer Funke Kupper draped over a giant ASX logo?
Get out there lads! Where is your corporate social responsibility? Even the little green fellows on Mars know who Alan Joyce is.
Apart from an exacting public relations schedule, Joyce has the hardest gig in corporate Australia.
As if the plethora of jurisdictions, regulations, a dozen unions, investors and other stakeholders, the astronomical fixed costs and incessant assaults by subsidised rivals were not enough, there is always a terrorist threat, a SARS epidemic or an Icelandic volcano ash-cloud just around the corner.
Then there is the nagging fact airlines simply don’t make good investments. Their return on capital invested lags their cost of capital. It is a fact which gets overlooked in the labour-versus-capital debate.
To contend that Qantas must be delivering the sort of returns notched up by other top 100 companies, or otherwise it’s someone’s fault, is to ignore reality. In aviation you do well just to stay alive.
In its 100-year history the global aviation industry has made a cumulative loss. In the cutthroat US market, the airline companies spend just as much time lurking in Chapter 11 bankruptcy protection sidestepping their creditors, as they do solvent.
The numbers tell the Qantas story. The company was privatised and listed on the stock exchange in July 1995. Retail investors got their shares at $1.90 and institutions paid $2 a share.
Yesterday, it was changing hands at $1.46. Yes, there have been many dividends in the interim, but you get the picture. Virgin Blue debuted in 2003 at $2.25 and now fetches 41¢.
As investments, airlines are marginal. As a trade, Qantas is a better proposition as there are typically a couple of bonanza years in the nine-year cycle into which the share price rallies.
On the last run-up in 2007, Alan Joyce’s predecessors did their darnedest to sell the airline to the now-defunct Allco Finance Group, Macquarie and themselves – and their $10 billion in “covenant lite” debt – at $5.60 a share.
It was a top deal for shareholders, though exceptionally cheeky since Qantas is shouldered with broader responsibilities than just making shareholder returns and is a protected species like the banks. But this underpins a trader’s downside too. A countercyclical investor might be tempted to buy the stock down here.
As evinced by Joyce’s recent grounding of the fleet, the government will keep Qantas in the skies. It might even, at a pinch, protect the equity holders as well as other creditors in the event of a collapse.
There is a yin for every yang. Qantas enjoys a hallowed status, and one of the most lucrative airline duopolies in the world in the Sydney-Melbourne route, but its international operations are unprofitable – just like many of its rivals.
And so it was this week that another restructure was announced. Qantas would be split into four divisions: Qantas International, Qantas Domestic, Jetstar Group and Qantas Frequent Flyer.
There was much talk about accountability, transparency and the urgent need to address the dire plight of Qantas International.
Still, many of the same old concerns will linger. Jetstar flies long-haul. Does it maintain its own planes? How are the costs and the revenues split? The net result may entail more management, more reporting lines and more divisions but not necessarily more profits.
As a tactic in the crusade against the dreaded hydra-headed unions, Joyce revealed the international business lost $214 million last year. But Qantas is hardly exceptional in this, that a thriving division will support a struggling division in its lean years that is. That’s business.
In the aviation business, lean years are de rigueur. All the studies show that of all the other players in the aviation chain – from airports to caterers, handling companies, aircraft lessors, manufacturers and distribution groups – airlines regularly return the least on capital employed, often by some margin.
Analysts put this down to the sheer complexity of the business. It is like no other. An airline can’t control its suppliers – the volatile cost of jet fuel – let alone its revenues as, despite all the advertising and marketing, price is most often the determining factor in ticket purchases.
The big winners over the years have of course been the consumers, not the shareholders. The price of a ticket from Australia to the US is, incredibly, the same as it was 30 years ago.
While liberalisation has opened the skies for consumers, at a corporate level the manacles of regulation globally will continue to prevent the sort of industry restructuring required for Qantas to deliver a higher and more consistent return on capital.