Qantas chief upbeat

A report in the Australian by Glenda Korporaal says that Qantas chairman Margaret Jackson predicts that the current “purple patch” in the world aviation industry could hit “turbulence” in a year or two.

Speaking on the eve of her retirement after 15 years on the Qantas board, the last eight as chairman, Ms Jackson said her successor, Leigh Clifford, would probably have a year or two before he had to deal with “some speed bumps” in the industry.

She said the arrival of new-generation aircraft such as the Airbus A380 and the Boeing Dreamliners would add significant capacity to the world airline industry over the next few years — changing the profitability of the industry.

Ms Jackson also expressed her concerns at the potential impact of federal Labor’s industrial relations policy on Qantas, warning that it could reduce flexibility in the airline’s 34,000-strong workforce.

In an interview in her office in Melbourne this week, she said Qantas had made use of the industrial relations changes brought in under the Howard Government.

She warned that rolling these changes back could have an impact on the airline’s staffing levels “down the track”.

Ms Jackson also said Qantas shareholders should say a “big thank you” to the private equity consortium that made an unsuccessful $11 billion bid for the airline, as the bid had helped push up the share price.

The shares had been running at between $3 and $4 in the year leading up to last December’s bid of $5.45 a share by the Airline Partners Australia consortium.

The share price held up after the surprise collapse of the bid and closed yesterday at $5.85 a share.

“Private equity saw the value in Qantas that the existing shareholders didn’t see,” she said.

Ms Jackson, who came under fire from some quarters for her handling of the APA bid, said there was nothing she would have done differently — except for not giving an interview from her hospital bed.

In hospital for an operation on her arm at the height of the bid, Ms Jackson warned that the Qantas share price could fall if the takeover bid failed, as international hedge funds, which then held a large percentage of the register, would sell out if the bid lapsed.

She said at the time that shareholders who did not understand this had a “mental problem” with how the share market worked — a remark which provoked criticism that she was too closely supporting the bidding consortium.

The APA bid failed at the last minute when the consortium was unable to get the 51 per cent of votes it needed to keep the deal alive.

But Ms Jackson said swift action taken by the Qantas board and management to “unleash value” in the airline with a number of moves such as a share buyback scheme and plans to separate Qantas holidays and its frequent flyer business had helped to hold the share price up since the collapse of the bid.

Former Rio Tinto chief executive Leigh Clifford who arrived back in Australia from London last week, takes over as Qantas chairman at the annual meeting next Wednesday.

Ms Jackson said Qantas had emerged stronger from the “challenges” of the past few years, including the failed bid.

She said aviation was going through a “purple patch”.

“In all my years on the Qantas board, this is the most remarkable period I’ve ever seen.”  “Because of the delay of the A380 there is a global shortage of capacity.”  “It’s going to last for about two years before the A380s start to be delivered.”

Ms Jackson said the economics of the airline industry meant that the revenue from constantly nearly full planes fell straight to the bottom line, boosting profits.

She said the industry was also benefiting from the stronger than expected Australian economy and the boom in Asian economies.

“The economic health of the world and in particular the economic health of Australia has meant that the number of people travelling is strong,” she said.

It was also “remarkable” how strongly the tourism industry in Australia had held up, despite the strength of the Australian dollar.

“You have an economy that is just fantastic, which is great for an airline based “in Australia.

“For the first time in Qantas history it’s a part of the world which is growing the strongest.”

“Being an end-of-the-line carrier, it is difficult to participate in the UK and the US, but at this moment we are seeing strong growth in business and tourism intra-Asia.”

Ms Jackson said Mr Clifford would be taking over at a time when Qantas was in strong financial shape, with a strong strategic position and a “sensational management team”.

“He’s arriving in this purple patch and has probably got a year or two before he starts hitting some turbulence.”

Ms Jackson said she was now recovering from a serious illness that she battled secretly during the course of the APA bid, an illness that brought her near death in intensive care over Easter.

She had contracted a virus and then developed a severe allergic reaction to the drugs she received. The subsequent period of immobility caused deep-vein thrombosis.

She also broke a hip when she collapsed in the shower around the same time. She was forced to use two crutches for many months, but is now able to get around with just one.

“I had a shocking year on the health front but I’ve come out of it,” she said.

She said she still needed some time to recover fully, but was now “chirpy and happy”.

Ms Jackson, who is a board member of the ANZ Bank and the clothing company Billabong and chairman of Flexigroup, said she would not be seeking any new directorships in the near term after her retirement from Qantas.

She said she would spend more time on her voluntary work, which includes being chairman of the Asia Pacific HIV-AIDs business coalition and president of Australian Volunteers International.

“I’m not taking on any new directorships,” she said. “I just want to get strong and healthy.”

Ms Jackson said Qantas had been very supportive of the industrial relations changes introduced by the Howard Government and had used them in its dealings with its workforce.

But she admitted she worried about the prospect of those changes being “rolled back” under a Labor government.

“There could be some changes, if some of that is rolled back, in terms of flexibility and employment growth,” she said.

“It could have an impact on employment down the track.

“Qantas is an unusual organisation.”  “It has more unions and more complex industrial relations issues than most companies in Australia.”

“Having a little bit of simplicity and flexibility has created some good opportunities for employment growth within Qantas.

“If that gets rolled back it could have a negative effect on employment and productivity.”

A Report by The Mole from The Australian