One cheer for Qantas

Qantas’s decision to lock out its staff looks to have been a qualified success. The slow bleed industrial action will now cease, and the issue will come to a conclusion (one way or another) in the next few weeks.

Despite the fact that their course of action has left me stranded, i am pleased they have exercised their right not to provide air services. Their brand was being damaged by uncertainty already, and it is reasonable to risk greater brand damage to end a certain slow bleed.

As a stranded passenger, i have been reading the coverage with interest. This morning’s wrap of views by the news website lacks any cover of my most acute frustration – the lack of alternate services.

Ultimately, Qantas is able to risk their brand in this way, and the unions are able to risk their member’s jobs, because of the lack of competition in the Australian air services market. Singapore airlines, for example, would love full and unfettered access to the Australian market.

The rents Qantas accrues as a result of these restrictive regulations are divided between labour and capital, according to their relative bargaining positions. When bargaining power shifts – as it has thanks to Orwellian sounding fair work act – it is precisely in these industries that we should first expect to see conflict.

While changing these labour laws is probably also a good idea, the bigger picture is that a protected industry will be prone to conflict. The solution is to open the skies. Then everyone would have to act with greater consideration.

The workers would have greater ability to change employers if Qantas really is giving them a bad deal, Qantas management / capital would risk losing far more by (temporarily) withdrawing from the provision of air services, and all customers (not just us stranded ones) would be better able to get where we are going.

Finally, the Government would not have to get involved in fights that cannot be won.

It should make us all uneasy that crucial management decisions are going to be taken by third parties in three weeks if capital and labour cannot reach agreement. Shareholders own the company – it is theirs to ruin.

These restrictive regulations are a tax on Australian users of air services, which is divided between capital and labour. The present chaos ought to make it clear that it is flyers who pay that tax. The Government could most usefully solve this problem, to the ongoing benefit of all Australians (excepting Qantas shareholders and their employees) by allowing greater competition in the Australian air services market.

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12 Responses to One cheer for Qantas

  1. The Lorax says:

    Whatever … I’m just flabbergasted by the stupidity of Qantas shareholders awarding Joyce a 70% pay rise in the midst of all this. In PR terms that is monumentally stupid. Executive pay rises could have been held over for a year until the battle with the unions was won. Joyce is hardly starving!

    By all means deregulate the Australian air travel market, but executive remuneration is clearly out of control here, and around the world. Please show me what shareholder value Joyce has delivered over the past year. I think I’m off to join the 99%….

  2. Rajat says:

    Touche Ricardo. For SQ, ditto Air NZ, etc, etc. As for Joyce’s remuneration, that is no one’s business other than Qantas shareholders and the Qantas board.

    • The Lorax says:

      Bullsh*t. Its precisely that fundamentalist free-market attitude that has got us to the current (ridiculous) levels of executive remuneration.

      I never agree with Michael Pascoe. Never. But today he hit the nail on the head.

      In the midst of discussion about the Qantas dispute over the weekend, how many times did Alan Joyce’s pay packet somehow enter the debate? Just about every time. How much the CEO is paid really has nothing to do with the issues at the centre of this dispute, but it colours the battle and public opinion nonetheless. It is becoming a divisive issue in its own right – and not just at Qantas.

      From a public relations angle, it didn’t help the Qantas case when Joyce dissembled over his $5 million salary, claiming, among other things, that Qantas A380 captains are actually paid more than him on an hourly basis. Should have saved that red herring for a chortle around the board table. And it doesn’t matter that the Qantas board was worse when Geoff Dixon with the CEO, the remuneration committee apparently in his thrall.

      But Qantas’s sorry history of overpaying its CEOs is as good an example of any how out of touch Big End boards have become. The front page of the Weekend Australian Financial Review carried the photos of five boardroom blue bloods and James Packer, all pouring varying degrees of scorn on their revolting shareholders.

      Corporate Australia would be so much nicer if annoying shareholders weren’t allowed to have opinions. Or at least kept them to themselves.

      The arrogance, hubris and plain contempt on show is simply shocking. But the funny thing is that the directors club thinks the complaining shareholders are the ones who really don’t get it. The hoi polloi simply don’t understand how an ASX 100 board operates.

      There is a serious disconnect between the boardrooms at the big end and ordinary Australians. The boards genuinely can’t comprehend that they’re responsible for an obscene blowout in executive remuneration, that our society – their employees, their customers, their shareholders – are increasingly jack of it and that their remuneration committee’s excuses simply don’t hold water, let alone multi-million dollar pay packets. And even when the predominantly institutional shareholders wave through the excessive salaries, public opinion is not swayed.

      The defensive attitude of the directors’ club is understandable though – members don’t want to consider that they’ve been incompetent, that they’ve stuffed up, that the American model of competitive over-compensation is simply wrong.

      It’s rather sad really – and we’re all paying for it and will pay for it.

      Alan Joyce is no Steve Jobs. What has he delivered in terms of shareholder value? A big stinking capital loss, that’s what.

      • Ricardo says:

        I agree with you both – Qantas was foolish to pay Joyce in this manner, but in the end it is a matter for shareholders. They might have hidden the money in some weird options strategy or something similar – but then they might not have been able to explain what they were doing to their shareholders.

        Lots of people are overpaid … It is not really my problem if Qantas wants to ‘overpay’ Joyce.

        If Qantas were not mollycoddled, it would not be able to ‘overpay’ underperformers – and into that category i am willing to toss in both management and their striking staff.

        Sent from my iPad

      • Rajat says:

        Frankly, in my view, Alan Joyce can parade in front of Qantas baggage-handlers in a dress made of $100 bills and taunt them for being losers if he thinks that will make the business run better. Corporate governance is not the issue here and no one has a simple solution to the so-called problem of ‘excessive’ levels of CEO remuneration. Although the fact that so many top ASX companies are led by foreigners (ANZ, BHP, CBA, RIO, WBC, WPL, etc) suggests that the current remuneration levels are necessary to attract the international talent Boards think is necessary. As for public opinion, that should be irrelevant to the whole thing. I’m sure the public wouldn’t approve of my salary (or Michael Pascoe’s) either, and it’s a lot less than Joyce’s.

      • The Lorax says:

        Public opinion matters when it inconveniences thousands, its the lead story on the news for a week, and requires the intervention of the Prime Minister.

        If Qantas want to overpay Joyce, fine, but I’ll make two points:
        1. It was almost certainly institutional investors who voted in support of the pay rise, and the institutions are in on the racket.
        2. Joyce has delivered bugger shareholder value since he was appointed.

        My guess Joyce was paid the big bucks to bust the unions. Again, that’s fine — the unions are being unnecessarily greedy given the difficult environment Qantas are operating in (thank you Dutch Disease!) — but what I can’t get my head around is the stupidity of very publicly giving Joyce a big pay rise in the midst of what was always going to be a very public dispute.

  3. ssec says:

    I think the salary increase is so obviously wrong, there must be something more behind it…. probably what happened was that Mr. Joyce demanded that salary increase as a pre-condition to do what he did on Sunday. That is: show you are behind me or… The future of Qantas is not looking good. Such a huge unresolved conflict within the company will hang in there for a long time. I guess Mr. Joyce will have to go at some point… and there you have another reason for the salary raise. Really Mr. Joyce looks like a puppet controlled by someone else, why would he make him self so unpopular otherwise? A much easier choice for him would have been to give in the demands of the unions for peaceful leaving.

    • The Lorax says:

      He’s been brought in to bust the unions … but the PR management of the issue has been appalling.

      • ssec says:

        Sometimes it pays to be outrageous. If you anchor expectations to being bad, it will be easier to look better later on.

  4. On your Marx says:

    such a massive salary increase when Qantas is crying poor to their employees is nothing short of astounding.

    When it is said they had to do this because of what people get in the market, ie comparative wage justice, simply enraged the employees.

    if Senior management think they can bring in significant economies under these conditions they are living in cloud cuckoo land

  5. Manny C says:

    “Without the threat that arises from economic competition, organizations have no reason to be efficient and thus no reason to be meritocratic”

    http://www.city-journal.org/2011/21_4_meritocracy.html

    • Ricardo says:

      Really interesting. I have been doing some reading on innovation, and a question is why successful firms seem to suddenly stop innovating – and then die. Perhaps it is that they become dominant, and cease to manage according to merit?

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