The Dubliner who is turning Qantas around
Interview by John Mulligan
It's 9am in Sydney, the middle of spring, and the day is already set to be a scorcher. Smoke from the bush fires raging in the Blue Mountains to the west of the city has been drifting over downtown for days, providing a stark reminder of just how close the danger is to the New South Wales capital.
"We've been helping by flying in firemen from the other states," says Alan Joyce, the amiable Dubliner and former Aer Lingus worker who has been chief executive of Australia's Qantas airline since late 2008.
He explains: "It's the combination of the temperature and the high winds that is the problem."
But Joyce has been busy fighting a few fires of his own at Qantas. The carrier – like others – has had to contend with an aviation sector in flux, often difficult economic conditions and competition that has hurt yields (average fares) in its domestic market and forced it to re-evaluate how its long-haul operation works.
After making an underlying profit of A$134m (€93m) and a net profit after tax of just A$5m in its financial year ended in June, Qantas is poised, say analysts, to make a loss in the current year.
That will follow a A$245m (€170.6m) loss in the 2012 financial year – the first ever loss for Qantas since it was fully privatised 17 years earlier.
Now the airline is two years into a five-year transformation designed to bring its long-haul business back to profitability (long haul lost A$246m in the last financial year, less than the A$484m it had lost in the previous period), broaden its alliances and target Asia for growth.
Just two months after the turnaround plan was unveiled in 2011, Joyce grounded the entire Qantas fleet in a pay dispute with unions. It was an unprecedented move that forced compulsory arbitration. He has been accused of adopting a 'divide and conquer' strategy towards staff.
"The international business is the problem child and that's the one we've been working at turning around," explains Joyce.
Before being appointed CEO at Qantas, he headed the group's low-cost unit, Jetstar, helping to set it up in 2003 with the help of consultants such as former Ryanair executive Conor McCarthy, who established and now runs Dublin Aerospace.
That turnaround at the international division has involved cutting costs and inking a major alliance with Dubai-based Emirates, shunning a decades-old relationship with British Airways.
The deal with Emirates – which sees the pair operate flights between Australia and Dubai – has been described by Joyce as the best move ever made by Qantas and his proudest achievement to date at the airline.
"The Emirates partnership was a step change for us," says Joyce, who studied maths and physics at Trinity College and who became an Australian citizen a number of years ago.
"It's the biggest joint venture we're ever going to do. It converted us from having one of the worst networks from Australia into continental Europe to working now with the best network, with 35 destinations in Europe. That partnership can only go from strength to strength.
"We've identified the nub of the issue. There are enough changes on the cost line, on the revenue line, with a new partner and new destinations and changes of aircraft to get the (international) business to sustainable returns."
But Virgin Australia, a competitor for Qantas on the domestic front, hasn't been idling on the tarmac.
Gulf carrier Etihad has taken an almost 20pc stake in Virgin Australia – the most it has been given permission for by Australia's Foreign Investment Review Board – in a bid to boost traffic through its own Abu Dhabi hub, just a 90-minute drive or so from Dubai. Air New Zealand also owns about 20pc of Virgin Australia, while Richard Branson's Virgin group owns 10pc.
Etihad's Dublin-Abu Dhabi route is the airline's tenth busiest, with many of the passengers from the Irish capital travelling onwards to Australia.
Joyce – who rebuffed approaches for a tie-in with Etihad, which is headed by ex-pat Aussie James Hogan and which owns nearly 3pc of Aer Lingus – before it plumped for Virgin Australia, is unfazed by the rival link-up. Virgin Australia made a A$98m loss in the year to the end of June.
"In Australia, the Emirates brand is extremely highly rated. The networks are very complimentary. Dubai is the second-largest international airport in the world and by 2014 it's set to become the largest," he says. "Emirates will be the largest international airline in the world and it's twice the size of Qatar, which is twice the size of Etihad.
"Scale does count. Product does count and marketing and brand strength count. Emirates is in a very good position to help us leverage off their presence in the corporate market."
But while Joyce embarked on a plan to revitalise Qantas in 2011, he was hit with shocking news.
A routine doctor's examination revealed that he had an aggressive form of prostate cancer. The doctor had decided to check on a whim. Joyce, who's now 47, hadn't intended to begin having his prostate checked until he was 50. If he'd left it, there's a good chance he'd have been dead within a decade.
"You just focus on getting through it and making sure that you manage that issue," he explains. "I had the operation to remove the prostate. I'm always a glass half-full kind of individual. Having found it and been able to fix it before it became a real problem, I just consider myself lucky.
"Afterwards, you try to figure out how you can help other people. I've become a bit of a campaigner on this. That's why I went public on it – the amount of people that do the test is very low, it's only one in 10 men in Australia. Outside the cities, it's only one in 30," says Joyce, who by now is back to running 10km three times a week near his Sydney home.
"There are more people dying from prostate cancer in Australia than from breast cancer and it's completely treatable if it's caught early enough.
"I always think something positive comes out of these things. I got a note from somebody a while ago who said after they saw the publicity that they went and had the test and found out they had early stages of the cancer, but they were able to manage it," he recalls. "When you get something like that, it makes you feel very positive that you've done something about it."
Soon after he was diagnosed, his father found out that he too had prostate cancer. But his parents are alive and well and Joyce travelled with them in Ireland this summer, doing a loop from Galway, to Sligo, Derry and Belfast.
Back in Oz, Joyce is always conscious of the intense interest in anything to do with Qantas, but he doesn't think that his Irish pedigree in any way colours how people view what he does.
"You're conscious of the iconic nature of the brand, but we have to do the right thing for the business. You have to make sure you're strong with your message, though."
And the message from his former boss and mentor, Geoff Dixon (who preceded Joyce as Qantas CEO), couldn't have been stronger last year.
Dixon and other partners, including a former Qantas executive, had bought a stake in the airline to challenge Joyce's deal with Emirates and its over-arching strategy. In a November counter-attack last year, Joyce pulled A$44m in funding that Qantas gives to Tourism Australia, where Dixon is chairman, underscoring the bitterness of the feud. Joyce insists the affair is now in the past.
He has ploughed on regardless with his vision of where Qantas should be positioned, and is extending Jetstar's reach around Asia.
It all leaves little time for anything else. "It's always 24/7," Joyce concedes. "You always have the phone next to you. We operate around the globe, every hour. You have to be always on call. I don't mind that. It's part of the job."