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Qantas captain flies into risky tenure territory
QANTAS is keeping its capable captain a while longer.
Chief executive Alan Joyce has just agreed to run the US$6 billion Australian flag carrier for another three years. He has led an impressive turnaround over the past decade, but problems often pile up for bosses who stick around too long.
Succession should be atop the board's to-do list. Mr Joyce, 52, ascended from subsidiary Jetstar in 2008, at the height of the global financial crisis. In 2011, he grounded the fleet during a union dispute. By 2014, Qantas was in a capacity war with Virgin Australia, shares were languishing around A$1 apiece and it sought a government bailout. A year later, though, he had helped swing Qantas back to profit, thanks to lower fuel prices and a dramatic cost-cutting initiative.
During Mr Joyce's stewardship, Qantas has generated an annualised 10 per cent total return for shareholders, including reinvested dividends, significantly better than regional rivals Singapore Airlines and Cathay Pacific.
It has been technically ambitious, too, with plans to fly non-stop from Sydney to London, a project championed by Mr Joyce. If he stays until the end of his contract, he will have been at the helm for some 13 years.
While shareholders cheered the news of his retention, there are risks for leaders of any organisation who cling to power. Blind spots tend to increase, thinking grows stale and relationships get too cosy.
One study published by Harvard Business Review in 2013 found that after five years, leaders typically become more risk-averse and less aware of changing conditions. What's more, the longer a CEO serves, the more likely it is that qualified replacements will look elsewhere for upward mobility.
At Qantas, frontrunners include Gareth Evans, head of Jetstar, and Tino La Spina, who is leaving his chief financial officer duties to run the international business. The airline and its investors may relish the consistency, especially with things going so well under Mr Joyce. It's also a cyclical business and Australia's economy has been defying gravity, meaning that new challenges are apt to be on the horizon. Qantas would do well to get a new pilot ready to take the controls.
"Alan Joyce, who has served as chief executive of Australian flag carrier Qantas since November 2008, has agreed to stay in his role for at least three more years," the company said in a statement on May 1.
"What I've always said about my tenure is that I'll stay for as long as the board and the shareholders want me and as long as I'm enjoying the job and feel I have more I can give to it," Mr Joyce said on the same day. REUTERS