Qantas chief executive: ‘We don’t think we’ll get back to 2019 levels until 2024’

Dublin man Alan Joyce sounds excited, almost joyous to be running an airline in the worst time the industry has ever known.

Joyce is the chief executive of Qantas, the airline that was founded in the Australian outback on November 16th, 1920. Whatever it had planned for its 100th birthday, it wasn’t this.

Like most Irish people living abroad, Covid-19 has meant seeing family in person is now an ageing memory. He last got back to Ireland in June 2019. “I had most of my family down [to Australia] though, at the end of 2019 because that’s when I got married [to New Zealander Shane Lloyd],” he says.

Joyce is very pleased with how his adopted homeland has handled the Covid-19 crisis. “I think Australia has done a better job than just about any other country in the world. Life is just about back to normal. We’ve had these frustrating lockdowns that have occurred every now and again, but primarily for people outside Victoria [the state that has seen most lockdowns] life has been normal for some time. We haven’t had a level of deaths anywhere near as bad as places like India, and this has given us time to get the vaccines rolled out, [even if] everybody has been a bit frustrated that the vaccines could have been faster.”

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Australia is currently dealing with several outbreaks of the Delta variant and residents of almost every state and territory in the country are again living under restrictions with full-blown lockdowns in Sydney, Darwin and Perth.

This week (after the interview had been conducted) it emerged that Australia will halve commercial passenger arrivals due to coronavirus risks as parts of the country emerge from lockdowns.

The country will reduce its cap on arrivals from 6,000 passengers a week to 3,000 by July 14th to reduce pressure on hotel quarantine, prime minister Scott Morrison said after a meeting with state and territory leaders.

However, Joyce remains positive about the future for the airline industry. “If everybody in the adult population [that wants to be vaccinated] is vaccinated by the end of this calendar year, we’re hoping some markets will open up. There have been some local bubbles in Europe and North America. Countries such as France and Spain are now allowing people in who have been fully vaccinated. Iceland has been doing this for a while, the UK and the Americans are saying that they are exploring, hopefully in July, to open up the US market to people that are vaccinated.”

Joyce practises what he preaches and has had his first vaccine dose. “The minute I could get it I got AstraZeneca in early May and I have to wait until August to get the second dose. My husband is just under 50 so he’s just had his second Pfizer jab.”

He is very clear on how vaccine passports will operate. “A lot of airlines are working on a number of different products. Iata [the International Air Transport Association] has one called Travel Pass. That’s the one a lot of airlines and countries such as Singapore have picked as the process which will work. We’ve been testing out the technology with the Australian government to link back in with a digital certificate which will be issued [showing] somebody is vaccinated. Iata is working on how it will work in each of the other countries. A lot of countries are already well progressed on this. We think we’ll be ready by October on the secure systems to validate if somebody has been vaccinated to allow for travel.

“There will be different rules in different countries. It will be a bit like how we judge visa requirements. When you check in at Los Angeles there’s a check with the Australian government system to see if this person has got a legitimate visa, and we’re allowed to board you on the basis you have. It will be the same with vaccines, basically a crosscheck on systems to see if you have the vaccination requirements and are allowed to travel.”

Anti-vaxxers and the vaccine hesitant will have to think again if they imagine they will get around vaccination conditions. “It’s going to be a government requirement, so that will be the first level. It’s not that different from vaccine requirements in some African countries for yellow fever and the like, which have been there for a while – if you’re vaccinated you don’t have to go into quarantine.

“Secondly, we’ve always been the safest airline in the world. We have a safety reputation, we have a duty of care to our passengers and to our customers and to our employees. We would have a requirement, even if countries didn’t have it, that people need to be vaccinated, with the exception of people who have auto-immune compromised conditions, and of course young kids. It’s actually agreed with by 90 per cent of our customers; our research shows they believe people should be vaccinated to travel internationally. A lot of people are saying they won’t get on an aircraft unless they have that surety.”

Joyce says business travel and people travelling for business purposes, even if in economy, is returning to normal domestically. “People travelling for business purposes [often] travelled in economy domestically, so we’re finding there was this view that Zoom and Microsoft Teams would hit the demand for business purpose travel and that could go down by a significant amount.

“We did our estimates in each of the markets and we found in Australia, 60 per cent of our domestic business traffic is construction, mining and government, and if anything they’re growing in size, they’re not behind the pre-Covid levels. The part that is behind, such as professional services companies where some of them figure they don’t have to make the trip, has not been impacted as much as people expected, because the personal contacts are needed. So our net assumption out of domestic is that it is probably a drop between 13 and 15 per cent in business-purpose travel in the corporate market, but because [rival airline] Virgin has gone into administration here domestically, we think we can make up a lot of that step down with market share movement. Before the [latest] Melbourne lockdown, the business market was back to 80 per cent of pre-Covid levels.”

International travel is a very different prospect, though. “We don’t think we’ll get back to 2019 levels until 2024. The way we manage that is we are just leaving the A380s, very big aircraft with big premium cabins, parked until the end of 2023 and we just use the 787s. It’s still an amazing product, but it has less business class seats overall and it can give you the network you had pre-Covid to the same destinations, but with smaller capacity and we can manage that demand until it recovers back to 2019 levels.”

After 9/11 many airlines went bust, but comparatively few have gone to the wall as a result of Covid-19. Are airlines now more prepared for a crisis than they were 20 years ago? “I think [Covid-19] is the biggest crisis in aviation history, as Iata said. You look at the fact that 95 per cent of world aviation was grounded during the crisis and I think the fallout from this will take place over a long period of time, so there will be airline failures, there will be mergers of airlines. I think it will take a number of years to wash out.

“My predecessor in Qantas [Geoff Dixon] referred to constant shock syndrome, where you had to get prepared for issues when they occurred and act rapidly. I do think airlines are getting a lot more efficient at that, certainly Qantas is. So a pandemic was on our list of items that could occur. We never thought it would be as big as this, we thought it would be like Sars.

“We thought the potential closures would happen over six or seven months, but it happened over weeks. It meant you had to be very agile, you had to be in a position where you made big decisions quickly. We stood down 25,000 people, grounded 220 aircraft and started planning how long this could be and making sure we stopped the bleeding of cash going out to survive. We raised debt, we raised equity, we did a restructure simultaneously. I think you have to do that when it’s the biggest crisis you’ve ever faced . . . the last few decades of coping with crises were nearly a preparation for Covid.”

Is Qantas’s response to the Covid-19 pandemic a case of “never waste a good crisis”?

“I think it’s more of a case of having to make dramatic decisions to cope with the crisis. Qantas has survived 100 years because we’ve reinvented ourselves when things went wrong. After the Wall Street crash [of 1929], after the second World War, Qantas continuously reinvented and did the hard things to survive. That’s why we are the oldest continuously operating airline in the world. This is another example of that. It has been the biggest reaction Qantas has ever done,” the Tallaght native explains.

What will Qantas look like post-pandemic?

“We’ll end up with about 10 per cent more market share to 70 per cent domestically, because our major competitor [Virgin] essentially went bankrupt because they had a failed strategy and weren’t able to adapt to this world. We’ve ended up having to [let go] 9,500 people, one-third of the workforce, because those jobs have disappeared and we have to restructure to take a billion out of our cost base.

“We’ll have borrowed over $2 billion (€1.27bn). We’re lucky enough we have a strong balance sheet to be able to do that, but we have to pay back that debt. And we have a big fleet replacement programme, with opportunities for growth, such as Project Sunrise [non-stop flights from Australia to Europe or North America]. If we don’t have the business agile and able to produce profits on the other side of this, we can’t afford that fleet replacement.”

Given Joyce’s and Qantas’s track record, it would be unwise to bet against them.