Airline Weekly

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New Qantas CEO Must Build on Predecessor’s Legacy

Edward Russell
May 2nd, 2023
Qantas and American jets taxi in Dallas-Fort Worth

Photo credit: Qantas and American jets taxi in Dallas-Fort Worth Flickr / Sean Davis

There are few airlines that are held as high in the national consciousness as Qantas Airways is in Australia. That’s why the airline’s first new CEO in 15 years is such a big deal.

Alan Joyce, Qantas CEO since 2008, will pass the reins to group veteran Chief Financial Officer Vanessa Hudson in November. She will inherit an airline that is not only an iconic national brand but one that has emerged strong from the pandemic. During the first six months of the Qantas 2023 fiscal year, the airline posted an A$1.5 billion ($1.1 billion) operating profit and a 16 percent operating margin, besting its results in 2019. The airline expects a profit for the full fiscal year that ends in June.

Hudson will also, notably, be the airline’s first female CEO. And it will be the first time in Australian aviation history that the country’s two largest airlines, Qantas and Virgin Australia, are led by women. Jayne Hrdlicka leads Virgin Australia.

“This is an exceptional company full of incredibly talented people and it’s very well positioned for the future,” Hudson said in a statement. “My focus will be delivering for those we rely on and who rely on us – our customers, our employees, our shareholders, and the communities we serve.”

But credit for the strong Qantas that Hudson is set to inherit rests with Joyce. During his 15-year tenure at the helm of the airline, he fundamentally changed Qantas into a profitable aviation powerhouse — even if some contemporary travelers are grumpy with its customer service. He led the group’s domestic business from strength to strength, including forcing its main competitor Virgin Australia into administration in 2020. And Joyce is also credited with the success of Jetstar Airways, Qantas’ budget subsidiary, which he launched in 2003 and led until 2008. Jetstar continues to be a key lucrative piece of the Qantas Group.

Turning around Qantas’ longhaul international business was a cornerstone of Joyce’s legacy. When he took the helm of the airline during the Great Recession in 2008, longhaul flying was a money losing venture for Qantas. Its international business lost A$1.4 billion from fiscal year 2011 — when Qantas began breaking out results for its international business — through 2014. It turned a small A$267 million profit in the fiscal year ending June 2015.

Key to the international turnaround were new partnerships. After years of blaming, in part, increased international competition for the airline’s own poor longhaul results, Joyce changed tune and forged a partnership with Emirates in 2013. That pact allowed Qantas to restructure its operations to Europe, keeping just flights to London while shifting everything else to connections on Emirates via Dubai. Qantas has pursued similar partnerships with American Airlines in the U.S. — though that pact was not approved until 2019 — and Latam Airlines in South America in the years since.

Joyce’s turnaround of Qantas’ longhaul business set the stage for many of the initiatives that Hudson inherits. Top of the list is Project Sunrise, which will see the airline launch two of the world’s longest nonstop passenger flights between Sydney and both London Heathrow and New York JFK around 2025. Qantas has ordered 12 Airbus A350-1000s for the new ultra longhaul routes. The new nonstops will build on the existing flights to London from Perth that began in 2018, and the planned nonstop to New York from Auckland that begins in June. Hudson will take over Project Sunrise, which will test travelers’ appetite for very, very long flights.

Hudson will also need to manage Qantas’ international partnerships. Key is its joint venture with American, which has grown in importance during the pandemic as travel between the U.S. and Australia was one of the first transpacific markets to reach near recovery after Australia ended border restrictions in early 2022. In the second quarter, Qantas capacity between the U.S. and Australia is down 37 percent compared to 2019 levels — largely due to the late arrival of new Boeing 787s — while American capacity is up nearly 7 percent, according to Diio by Cirium schedules. Despite the lower capacity, Qantas has added one new U.S. route to its map since the pandemic: Melbourne to Dallas-Fort Worth, which is American’s largest hub.

More recently, Joyce is credited with Qantas’ successful navigation of the Covid-19 pandemic that all but shut down global air travel. The airline was lifted, in part, by its highly-profitable loyalty program that continues to generate 20 percent-plus profit margins for the group. But he has come under criticism from travelers over his handling of operational issues that plagued the airline last year, and a perceived worsening in customer service.

Restoring Qantas’ historic operational reliability and perceived customer service levels will be an immediate challenge for Hudson. Joyce, during the carrier’s most recent earnings call in February, highlighted aircraft delivery delays at both Airbus and Boeing, and staffing and training issues as two of Qantas’ most pressing issues. The former is not expected to ease until at least the end of this year, which raises questions about the delivery timeline of the airlines’ narrowbody refleeting with new Airbus A220s and A321neos that are due to begin arriving during the fiscal year ending in June 2024. Staffing issues are also expected to abate in the 2024 fiscal year.

Hudson, as a finance executive, is seen as well prepared to manage Qantas’ fleet renewal. Aircraft capital expenditures through fiscal 2026 are estimated at $5 billion, and investors and analysts will be watching closely how the airline pays for the planes while maintaining investment-grade credit metrics.

She will also need to manage Qantas costs that, like airlines everywhere, have reset higher than before the pandemic thanks to inflation and other pressures. She will also be tasked with implementing the carrier’s decarbonization program.

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