Alan disembarks

CEO SUCCESSION

Need To Know

• Vanessa Hudson appointed CEO
• Alan Joyce to hand over in November 2023

While some market commentators will rejoice in the announcement of Alan Joyce’s retirement, his 15 year tenure as CEO has been a tough gig for which he has been well rewarded. Vanessa Hudson, currently CFO - is a ‘lifer’ at the airline - will assume responsibility for an airline that is well capitalised, well patronised and highly profitable. The main challenges are to negotiate the fleet renewal program, which she has overseen and designed, and to restore customer affection for a battered icon of Australian corporate life.

Alan Joyce may have stayed in the cockpit much longer than anyone anticipated, himself included, but his grit and hard-headedness was essential to the literal survival of the airline. Amongst many headlines during his tenure, the extremely close call with disaster for QF32 in November 2010 as the A380 battled failures of electrical systems, flight controls, braking and computer systems to land safely in Singapore may rate amongst his most memorable. Even though he was not on the flight, as CEO of an airline with a spotless safety history, no airline CEO wants to preside over a major aircraft loss.

Mr Joyce’s battles have been as much internal as external with the Jetstar brand, which he led, caused friction with a pilot cohort which fought over different pay and conditions in the budget airline brand. A heavily unionised workforce, which threatened ‘guerrilla warfare’ against QAN in 2011 for workplace changes, continues to present challenges. It was union-based action that led Mr Joyce to ground the entire international fleet that year.

The most obvious and by far the biggest challenge of his tenure was the COVID-19 pandemic that virtually shut down the global airline industry. Ms Hudson was CFO during that time and will have learned some valuable lessons from Mr Joyce on the fortitude it will require to lead this company.

Vanessa Hudson joined Qantas as an internal audit supervisor in 1994 and has worn a path through almost every part of the business except for flying the planes. Her replacement as CFO is yet to be announced. Her remuneration is yet to be made public, but it will be closely scrutinised given the near hysteria that has accompanied Mr Joyce’s rewards.

Investment View

The CEO succession question has been answered allowing QAN to get on with managing its strong post-COVID recovery. The balance sheet is ready to undertake a large fleet replacement program, just as operational cashflow is benefitting from high yield and demand. International airline activity is still materially below pre-COVID levels, but domestic travel has largely recovered, certainly in Australia.

We continue to see a strong earnings recovery driving the share price higher and retain our Buy recommendation.