Australians have never been more dismayed and distrusting of corporations. PwC, Optus, Medibank, Rio Tinto and countless others have gone down a pathway of temporary self-destruction by failing to appreciate the power of company reputation. Nobody thought that Australia’s golden child, Qantas Airways, would join this list. Not only have they joined it, but poor management and public deception means they now top the list. Calvin London takes a look at the downfall of the once-vaunted “Flying Kangaroo.”
Corporate reputation, how a company is viewed by its stakeholders (employees, customers, shareholders, clients and the general public), is strongly influenced by the company’s behavior. How a company relates to its stakeholders, the level of honesty and transparency are key factors. Studies have shown that a company with a good reputation has a better chance of attracting and retaining good employees. Conversely, companies with a bad reputation experience loss of revenue and high employee turnover and are more vulnerable to regulatory attention.
Recently, Qantas Airways, long considered a stalwart of a sterling reputation in Australia, has seen just how much company behavior can affect reputation. Since 2020, the poor behavior of corporate Australia under the cover of Covid has led to soaring distrust, not only for individual brands but for corporate Australia.
Qantas, which styles itself “the spirit of Australia,” has dropped so far down the reputation table, it has nearly bottomed out. Sure, it has come out of Covid-19 more profitable than ever, but this profit has cost it the trust of Australians.
How this happened provides a good example of what not to do if you want to keep your reputation. Don’t lie and deceive your greatest asset, your customers. Don’t play power games with the support of politicians. And make sure that the guardian of your reputation — your CEO — is not rewarded for unethical and deceitful behavior.
Qantas the company
Qantas is the largest airline by fleet size, number of international flights and number of international destinations in Australia and Oceania. It is the second-oldest continuously operating airline, founded in 1920. Popularly nicknamed “The Flying Kangaroo,” Qantas is considered the only airline in the world to fly to all seven continents, and it’s the only airline operating regular sightseeing flights to Antarctica.
Qantas has several accolades to boast, including the first non-stop commercial flight between Perth and London in 2018, connecting the two continents directly by air for the first time, and the following year, Qantas completed the longest commercial flight between New York and Sydney.
I remember Qantas’ good times well. The late 1990s and early 2000s were great years for Qantas, and most of the Australian public loved them. It was at a time when I was traveling extensively between Australia and the U.S., and for me (and many other business travelers) there was no other choice: It was Qantas all the way. Its position as a leading airline was strengthened in 2013 when it joined forces with Emirates and the combined carriers offered 98 flights a week to Dubai and from there to all the major cities on the European continent.
While strategically sound, it took two years for Qantas to turn its profit around and back into the green. Downgraded by S&P in 2013, it suffered losses in 2014 and eventually a profit of A$554 million in 2015.
The reputation of the Flying Kangaroo
Post-Covid, Qantas has been a hugely profitable organization. The company survived its entire fleet being grounded and seemed to emerge from the pandemic stronger than ever, except for one thing: It had gone from being the pride and joy of the Australian public to nearing the top of the list of distrusted companies. Qantas’ fall from grace has prompted rival airlines, airport operators and travel agents to call for swift structural reform to open the market to more carriers and rein in the giant.
Much of the trust Qantas has retained is due to its safety record, combined with wooing business travelers into its frequent-flyer program and lounges. If you’ve seen “Rain Man,” you’re no doubt familiar with the airline’s enviable safety history. As Raymond (Dustin Hoffman) famously says, Qantas “never crashed.” There is no doubt Qantas has an outstanding safety record, first place in most years since 2014, and again voted the safest airline this year, though the gap is closing. While it is beyond reproach in flight safety, Qantas has had its fair share of controversies.
In 2005 and again in 2012, it faced controversy over sexual discrimination. In 2006, Qantas settled a class-action lawsuit over price fixing, and in 2011, it pleaded guilty to cartel operations. Again in 2011, industrial action caused it to ground its entire fleet, and just recently in May, Qantas lost an appeal for unfair dismissal of almost 1,700 baggage workers in 2021.
While one would assume these incidents would damage a company’s reputation, Qantas until recently seemed to have successfully camouflaged them behind a smoke screen that blinded many of its customers and travelers, retaining their business unconditionally.
… and then he was gone
I have always thought that a company’s board through the CEO are the ultimate guardians of the culture. There are numerous examples when poor ethical behavior by the CEO and either disrespect or ignorance of this responsibility have resulted in significant damage to the company’s reputation. CEOs are increasingly under pressure to set the tone and shape the company’s reputation and standing with key stakeholders. The way the CEO communicates with those stakeholders drives the perceptions of the company as a whole.
The decline of the Qantas reputation has to sit with the board and more importantly the previous CEO. Customers and employees do not like being deceived, particularly when the person deceiving them is paid a significant remuneration. Valid or not, most of the general public disagree with outrageous CEO remunerations.
Alan Joyce, who took over as CEO in 2008, was always controversial, but because of the company’s standing with the Australian public and its shareholders, Qantas always seemed to dodge the bullet. For example, in 2011, Joyce was advised of a plan to put relatively inexperienced pilots into co-pilot seats despite a parliamentary inquiry finding against the practice. That same year, as a result of continuing industrial unrest, the whole mainland fleet was grounded, having a significant impact on the public perception. The growing unease with Qantas was exacerbated by news of a 71% increase in his base salary and a grant of 1.7 million Qantas shares as part of a long-term incentive plan.
During 2016-17, as Qantas cut 500 full-time jobs to achieve a $2 billion saving, the then-CEO’s salary doubled to $24 million, an action that got him a pie in the face from a protester (literally), while giving a speech in Perth. The wheels were starting to fall off, largely due to the perception of Joyce’s unethical behavior to his employees, the public and even the shareholders.
The total profit over the first 11 years of his reign dropped to $1.7 billion, less than half the amount made by his predecessor. Further, the average age of Qantas planes increased by 50% to nearly 13 years old, making the fleet far older than those of Asia-Pacific competitors (Singapore Airlines 6.9, Cathay Pacific 8.5 and air New Zealand 6.9 years), all while he collected a tidy $94 million, twice that of his predecessor, who at a much lower remuneration returned consistent profits for the company.
In 2014, Qantas revealed a $2.4 billion loss and staff were asked to freeze their wage levels for 18 months. At the same time, executive and senior management of Qantas received remuneration packages collectively increased by $60 million each year. The net effect of this was to further demoralize an already damaged workforce who had nowhere else to go to express their disgruntlement but to take it out on the once-loyal customers.
Qantas gets Covid, the final straw
The final blow to the Qantas reputation at the hands of the board and CEO came with Covid-19 pandemic. At a time when the world was on edge and Australians in particular because of its geographical dependence on air travel, Qantas dug a hole and jumped in. In response to the pandemic, in March 2020, Qantas announced it was suspending 60% of its flights and putting two-thirds of its workforce on leave, suspending all international flights and mothballing more than 150 of its aircraft. Three months later, the airline announced 6,000 employees would lose their jobs, followed up in November by a statement that all passengers would need to be vaccinated to fly and a further 2,000 job losses were to occur.
While Qantas argued these were all necessary tactics to survive, it did little to keep the support of its loyal passengers. The reputational rot was about to peak. In 2022, Qantas landed in hot water with the Australian Competition and Consumer Commission (ACCC), which accused Qantas of engaging in false, deceptive and misleading conduct by advertising tickets for more than 8,000 flights that had already been canceled, in some cases for up to 48 days. The ACCC also alleged that Qantas had not notified existing ticket holders that their flight (one of 10,000 affected) had been canceled.
Qantas has also been hit by a high court ruling that it illegally sacked almost 1,700 staff during the pandemic, and union claims against Qantas aren’t anything new. A Transport Workers’ Union of Australia report in 2015 alleged that the airline sacked 5,000 full-time employees only to replace them with 9,000 part-time workers. These actions did not help the reputation of Qantas through Covid. It was further damaged by the announcement in early 2023 of profits of A$1.7bn for the second half of 2022, after experiencing losses due to the pandemic.
With a little help from my friends
A disgruntled public, depressed workforce and regulatory inquiries had all taken their toll on the Qantas reputation. The final straw was a one-two punch delivered at the hands of the current government. Reports emerged claiming Qantas and the government had colluded to protect landing slots at Sydney Airport, so competitors could not access them and degrade the 60% market share enjoyed by Qantas. And Qantas’ influence on national aviation policy also boiled over when the government blocked a request by Qatar Airways to operate more flights into Australia following lobbying from Qantas. Furthermore, it was revealed that Qantas received $1.3 billion in taxpayer funds during the course of the pandemic when other airlines, such as Virgin Australia, were told they did not qualify.
This was all complicated by the report that the prime minister’s son had been given access to the prestigious chairman’s lounge, deepening the relationship between Joyce and the government. Qantas operates lounges in all Australian capital cities, but access is available only via invitation from the CEO. Memberships are often given to high-profile politicians, celebrities, members of the media and company executives who hold major corporate travel accounts with Qantas.
With all of this controversy, Joyce decided to bring forward his retirement (but not to forgo the payout of over $21 million) and hastily leave the country on personal business. The CEO role has been handed over to Vanessa Hudson, previously the group CFO, to become the first woman in that job. Following Joyce’s lead, and during the upheaval of the senate inquiry, the chairman of Qantas also (finally) announced his resignation.
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What would the public know (and who cares anyway)
In April 2022, consumer advocacy group Choice lodged a complaint with the ACCC concerning the airline’s flight credit policy for canceled flights during the pandemic, which they alleged was unfair. Customers were issued flight vouchers with short expiration dates that became unusable due to ongoing travel restrictions.
Just over a year later, the ACCC found that the airline was the subject of almost 2,000 complaints over the previous year, with more than 1,300 complaints relating to flight cancellations. The report found that complaints about the airline had risen by 70% from the previous year and that the ACCC received more complaints about Qantas than any other business, a trend that has continued. Last year alone, the ACC received more than 2,600 complaints about Qantas.
The Australian public has been totally dismayed by the revelations of recent behavior by their golden child corporate brand. As many companies will attest, once the damage is done to reputation, it is a long road back.
Roy Morgan, a market research firm that tracks brand trust, recently stated that “moral blindness” had driven brands like Qantas into the gutter of the minds of Australians, who have never been more distrusting of corporate Australia since the firm began measuring trust and distrust in late 2017. Since 2020, the poor behavior of corporate Australia under the cover of Covid has led to dramatically soaring distrust, not only for individual brands but for corporate Australia.
The future of the flying kangaroo
In a recent statement, Qantas said it will spend an extra A$80 million on so-called passenger improvements through 2024, in addition to the A$150 million previously allocated for the job. There will be more and better trained workers in Qantas call centers, larger numbers of seats available for air miles and more generous support for passengers when things go awry, the airline says.
While much of the attention has focused on the CEO and chairman’s resignations and the incoming CEO, customers are still reeling from the company’s behavior.
If you want to destroy your company’s reputation, follow the path Qantas took. Lie and deceive your biggest asset, form inappropriate alliances with government members and handsomely reward your C-suite for their efforts.
While I feel for the new CEO, left to deal with the public opinion and to front the senate inquiries, she was part of the grand plan and as chief CFO would surely have had knowledge of some of the bad behavior of the past, which begs the question: Will there be any change?
It may sound as though I have it in for Qantas, but I don’t. I was one of those loyal customers who looked no further for over 30 years and must have flown on hundreds of Qantas flights domestically and internationally. I now find myself in a dilemma. Do I uphold my principles of ethics and expected corporate behavior or do I say that is just this way that business is done these days?
It will take a long, long time for Qantas to regain the trust and respect of Australians — if ever. What was once a stellar reputation is now a corporate mess thanks to the actions of those who did not seem to care about reputation.