By Tansy Harcourt
As record numbers of Australians board flights for their holidays, newly anointed Qantas CEO Vanessa Hudson faces an unprecedented branding crisis.
Many question whether she can handle the challenge.
Australia’s biggest airline remains the enemy of – rather than the spirit of – the nation as it turns its nose into the new year.
Customer service issues remain a problem post-Covid, the airline is taking an antagonistic approach to court-ordered mediation after being found to have illegally fired 1700 baggage handlers, and it looks to be gearing up for a protracted legal battle with the competition regulator over allegations it illegally sold tickets for flights it had already cancelled.
“Constant paper cuts,” is how portfolio manager John Ayoub from Wilson Asset Management describes it.
Hudson will take a “short break” over the Christmas period before she returns to the job that probably seemed like successfully climbing Everest after 30 years as a Qantas employee.
Now she will be seeing the crevasses and feeling the cold as she tries to clean up the mess that her strong-willed predecessor Alan Joyce has left behind. She was his second in command as was the chief financial officer.
Joyce stepped down suddenly in September when it became clear that the public had enough of the airline making record profits and paying him more than $27m in his final year; while failing to get passengers to their destinations on time, or at all, and refusing for some time to allow refunds for flights that the airline cancelled during the pandemic lockdowns.
Chair Richard Goyder will leave early for the same reasons.
Fixing this mess “is more than a one-person job,” says Ayoub.
And Hudson will have to do it without the help of Loyalty chief Olivia Worth, who turned the division into a profit centre accounting for 20 per cent of the airline’s returns and then resigned after being overlooked for the CEO role.
Hudson also has an unproven CFO who stepped into her old boots and a new domestic CEO. She will also have a new chair when Goyder departs.
“It needs to be everyone working on this because it’s such a big task,” says Ayoub.
“I don’t expect that the brand damage or the Australian psyche to change on Qantas immediately. It’s going to be a multi-year journey before they recover a lot of the damage that has taken place this past year.”
From a share price perspective, Ayoub believes this “bad news” is probably already factored in.
But the damage is likely to extend into early in the new year.
Qantas will be back in Federal Court defending the Australian Competition and Consumer Commission’s claims that it sold tickets on so-called “ghost flights”. The airline’s defence is that when a customer buys a ticket for a flight, it actually sells “a bundle of rights that includes alternative options to which consumers are entitled in respect of a cancelled flight”.
It’s an interesting legal argument but not one Qantas accepts when a customer is at fault for needing to change a flight they are booked on.
The Federal Court rejected Qantas’s legalese when it came to firing its baggage handlers, a ruling subsequently upheld by the High Court. Now Hudson has been ordered by the court personally to handle negotiations with the Transport Workers Union over fines to be paid. Those talks will resume this year.
At least it appears Qantas is making inroads into improving its flying proposition.
The latest statistics showed Qantas had better on-time departures and fewer cancellations than rival Virgin Australia, albeit neither of them performed as well as they did before the pandemic.
Forage Funds chief investment officer Steve Johnson says Qantas has “definitely taken some steps in the right direction,” but he has not seen enough evidence Hudson can right the ship.
“I’m not sure about that,” Johnson says, “Just because there hasn’t been enough time … I probably still need another three to six months to assess.”
The problem, Johnson says, is that even though people have relatively short memories in the corporate arena, Qantas’s issues have been in the public glare.
“I think the experiences that people have had have been particularly difficult and they still have a lot of problems that I don’t think are easy fixes. They’ve taken the easy steps, but actually working to deliver on the schedule that they’re trying to deliver is a bigger problem that the global airline industry is facing that I don’t think is going to be fixed anytime soon.”
The airline has been ranked Australia’s most complained about company by the ACCC for the second year in a row.
But will it equate to less people buying tickets on Qantas? Johnson thinks probably not, in part because the loyalty program is so strong.
“As someone who flies a fair bit, I’ve done my fair share of whingeing, but if I’ve got the choice I’ll still fly Qantas over Virgin because it is just as bad with Virgin,” he says. “Once you’ve got status with an airline, and you can go into the lounge for free … I don’t think the changes in behaviour are going to be particularly (strong).”
The same, he suspects, will be true for winning back favour with Canberra.
Qantas’s all-too-cosy relationship with the government came to the fore in 2023 when Canberra refused to allow Qatar Airways greater access to the local market. The decision came without explanation, with Qatar first reading about it in the media, and what followed was a series of bizarre and inconsistent explanations.
The winner in this was Qantas, which does not want increased competition from arguably the best business and first class airline in the world ahead of launching its Project Sunrise long haul flights. The loser was the Australian public, which is still paying over the odds prices for airfares to Europe.
Amid controversy over the ruling, it was again shown how much more government officials and politicians fly Qantas over Virgin regardless of the price, and also raised issues with Qantas’s decision to back the Albanese government’s Voice vote.
Qatar is likely to resubmit its request to increase services, and possibly due to the public backlash over the decision the government made the surprise move to give Turkey a fivefold increase in landing rights into Australia, which was more than it asked for.
But despite a looming increase in competition and ongoing issues with customer service, Johnson still thinks Qantas is worth a shot and recently just bought back in at just under $5 per share.
“For all of the concerns over the business, it is a domestic duopoly in which it has 65 per cent market share and it’s more profitable than it’s ever been,” Johnson says. “Part of the problem here is that it is as profitable as it is in an environment where the customer service is not great.
“The airline itself is in rude health economically and it’s my view that they just need to spend more of that looking after the long-term brand rather than short-term return to shareholders,” Johnson says.
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