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Fund managers and shareholder advisers have cautiously welcomed the early departure of Qantas chief Alan Joyce, but some say it may not be enough to quell the disquiet around the company.
Qantas announced the departure of Joyce on Tuesday morning, two months ahead of his planned retirement from the airline he helmed for 15 years.
Qantas boss Alan Joyce did a great job until he didn’t, according to fund managers and shareholder activists.
Joyce’s early exit follows weeks of regulatory and reputational issues that have buffeted the nation’s largest carrier, including legal action by the Australian Competition and Consumer Commission against Qantas for allegedly misleading its customers by selling tickets for already cancelled flights, the treatment of customer flight credits and the size of Joyce’s pay packet.
Qantas provided no update in its Tuesday announcement on the status of Joyce’s remuneration package, estimated to be worth in excess of $24 million including short-term bonuses and long-term rewards. Qantas’s shares initially rose 1 per cent on the news of his exit, but were trading flat on Tuesday afternoon.
Tribeca Investment Partners portfolio manager Jun Bei Liu said Joyce had done well for shareholders prior to the pandemic, but that he had been less effective in the years since.
“He has managed the airline incredibly well in the past,” she said. “But it’s been a challenge for Qantas in the last few years post-COVID, and Joyce perhaps pushed operational efficiency too hard.”
Jun Bei Liu, portfolio manager at Tribeca Investment Partners, says Qantas has been a recent disappointment. Credit: Brook Mitchell
During the pandemic, Joyce acted very quickly to ground the airline and cut costs, but he wasn’t fast enough to add capacity back into the business, according to Liu. “He moved way too slowly,” she said. “Qantas had more backup staff before COVID, and more capacity. That’s why we’ve had more flight delays and cancellations recently, and it’s created a lot of customer issues.”
Ultimately, Joyce may have become too focused on profitability rather than longevity of the business, Liu said.
Australian Eagle Asset Management chief investment officer Sean Sequeira said Joyce had joined Qantas during a turbulent period, and that his management style had been a good fit for the airline.
“In terms of his hard-nose management style, it has actually been quite beneficial to Qantas at a very difficult time,” he said. “Joyce came at a time when competition was extremely fierce and the company was trading at a fraction of its book value. He worked through a very difficult time to put the company in a financially healthy space and proved himself as a very good manager and custodian of the business.”
However, the pandemic generated another difficult period, Sequeira said, in which Joyce “pushed a little too far.”
“It’s a high capital-intensive, difficult business to run, but the most recent period leaves a mark on Joyce which, if you look at his broader achievements, is probably unfortunate for him,” Sequeira said. “He goes out on a bit of a low.”
Vas Kolesnikoff, head of Australian and New Zealand research for proxy advisory group Institutional Shareholder Services (known widely as ISS), which advises investors on how to vote on company resolutions, said he was keeping an eye on Qantas’ handling of the media and the regulatory backlash to the company.
“We are watching the board’s response to this, and the company’s response to this.
“There’s some time between now and the AGM, and things could change before then,” he said, pointing to other companies that had decided to change executive remuneration structures due to bad press ahead of their annual meetings including Commonwealth Bank and Westpac.
‘There’s been so much bleeding, that much bad PR that the board had no choice but to do something about it – and there’s going to be more to come.’
Qantas’ shareholders have a long history of supporting the board’s resolutions, and prior criticisms against its remuneration structures have not resulted in a large investor protest vote.
Late last week, two major proxy advisory groups – the Australian Council of Superannuation Investors and Ownership Matters – also said they would be looking for a response from the board in regards to Joyce’s remuneration and tenure. Both groups declined to add to their statements on Tuesday.
Many fund managers have sold out of their Qantas holdings in recent months after scooping up shares during the pandemic when the airline was trading much lower at around $3 or $4 a share.
Steve Johnson, chief investment officer of Forager Funds Management, said it was likely there would be more changes at Qantas as the board considered its options.
“I think there’s been so much bleeding, that much bad PR that the board had no choice but to do something about it – and there’s going to be more to come,” he said.
“I think you will see them try to reset their relationship with their customers and their relationships with the media and government.”
“I would not be surprised to see the company take more actions, ie, paying people back the money that they are owed and changing their behaviour around some of these cancelled flights. You’ll see a lot of that over the next couple of months and this is just the first step.”
Forager’s funds held a stake in Qantas until recently after buying in during the pandemic. It began selling out when the company’s share price recovered to $6.50 in June this year.
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