Interview: Alan Joyce on the turnaround at Qantas

Alan Joyce, the Irish chief executive of Australian airline Qantas, has passed the toughest test of his career with flying colours. The company has just announced record €620 million profits and intends to return half of it to shareholders.

In 2014, his transformation plan for the airline seemed grounded by huge losses and critics were calling for his head. Three years earlier his proposal to cut 5,000 jobs at Qantas had sparked industrial unrest.

They are eating their words now. John Addis, founder of Intelligent Investor, wrote an article in the Sydney Morning Herald apologising for predicting two years ago that Qantas would sack its chief executive.

“Mostly I felt happy for our people and the effort they put in,” Joyce says. He adds that the part the airline’s 30,000 staff played in turning the company around was key in the results. Another factor was the large number of satisfied travellers that flew with Qantas.

“We have never dropped the ball when it came to customer service, we have continuously invested in that all through transformation.”

The final element was Qantas’s Australian $921 million (€621 million) profit for the six months ended December 31st, the first half of its financial year. It was a spectacular turnaround from the A$300 million loss reported at the beginning of 2014. Profits included A$448 million in fuel savings.

Even there the company can claim credit as it has sophisticated hedging and was one of the first to move as oil prices began to fall. One salient point was the performance of Jetstar, the Qantas low-cost carrier Joyce established, which made $262 million. “Jetstar made more money in six months than it did in any full year in its history,” he says.

The subsidiary has seen off its rival Virgin, whose 25 per cent shareholder, Air New Zealand, now wants to sell up. Jetstar's 35 per cent cost advantage ultimately forced the other airline to stop pursuing budget flyers and go after premium traffic. This is the opposite of the European experience, where established players cut costs to combat Ryanair and EasyJet.

“The CEO of one of the big European low-cost carriers recently told me that Qantas was defying gravity,” Joyce says.

Ryanair played an indirect role in Jetstar. Qantas set up the subsidiary in 2003 with Joyce at the helm. He brought in a former executive with the Irish airline, Conor McCarthy, to work on the new business. “He helped us to set up Jetstar and gave us some amazing insights,” Joyce says. “He has been very good about coming back from time to time to make sure that we do not get off track.”

Outside its domestic market, where it fought bitter battles with Virgin, Qantas faces stiff competition in its international business. Joyce says 32 airlines fly the "kangaroo route" from Australia to Britain. Asia is similarly crowded.

Using their bases as hubs between there and Europe, the Gulf carriers – Emirates, Etihad and Qatar – have built strong franchises there, but they are just the latest wave.

"We've always had competition; before the Gulf carriers we had Singapore and Cathay Pacific," Joyce says. It has also opened new opportunities for Qantas, which has a code-share with Emirates, with which Joyce flew to Dublin.

In Europe, only British Airways flies to Australia. It stops in Singapore but there are aircraft on the way that will eliminate this need. In 2021, Qantas will have the new Boeing 777 8X, which could connect Ireland and Australia. However, its chief executive says that initially at least, the airline's customers are more likely to be interested in other European destinations.

Meanwhile, he has to implement a further $600 million in savings at Qantas to hit the $2 billion target set in the transformation programme.

Joyce, who is from Springfield, Tallaght, did applied science at the Dublin Institute of Technology and a master's in operations research, a branch of mathematics, in Trinity College Dublin. That led to a job in Aer Lingus where he caught the airline bug. "I got the smell of kerosene in my nostrils," he says.

He moved to Australia in 1996 and worked in network and schedule planning before becoming chief executive of Jetstar. Five years later, he took charge at Qantas.

He has put his stamp on the airline in more ways than one. Joyce is gay and his company is backing the campaign for marriage equality in his adopted country. Qantas also supports a constitutional change giving recognition to Australia’s indigenous peoples.

A firm believer that diversity is good for business, he argues that it is best introduced to the workplace by setting targets, combined with training and other initiatives to combat bias at it roots.

Joyce was in Dublin for the Irish Aviation Authority’s gala ball yesterday, where he was honoured for his contribution to the global aviation industry.