Locked on tar­get

HE IS POR­TRAYED BY CRIT­ICS AS THE PUP­PET OF MID­DLE EASTERN MASTERS OUT TO DE­STROY QAN­TAS, BUT FEW PEO­PLE KNOW WHAT MAKES AUS­TRALIAN EX­PAT AND ETI­HAD CHIEF JAMES HO­GAN TICK. HE OPENS UP FOR THE FIRST TIME TO THE DEAL.

The Australian - The Deal - - Cover Story - BY DA­MON KITNEY PHOTOGRAPPHOTOGRAPH AARON FRAN­CIS

James Ho­gan plonks him­self down on a couch in the topfloor Am­bas­sador suite of Mel­bourne’s Grand Hy­att ho­tel. It should be a place to re­lax, to take in the panoramic city views and 100 square me­tres of lav­ishly dec­o­rated space. But not to­day.

In­stead, Ho­gan is fo­cused on a sin­gle piece of pa­per. Nor­mally im­pec­ca­bly com­posed, the chief ex­ec­u­tive of Eti­had Air­ways even looks a tad anx­ious. As we ex­change pleas­antries, he can’t help try­ing to sneak a peek at my list of ques­tions. He might do dozens of me­dia in­ter­views ev­ery year, all ex­e­cuted with his trade­mark charis­matic aplomb, but this one is dif­fer­ent.

To­day, he’s been in­vited to talk about him­self. He guards his pri­vacy jeal­ously and has stu­diously avoided sit­u­a­tions such as this. How­ever, events in the past few months have changed his mind. He has made the big­gest strate­gic moves of his cor­po­rate ca­reer, but has also come un­der at­tack.

He pre­sides over a car­rier that owns 10 per cent of Aus­tralia’s sec­ond-largest air­line, Vir­gin Aus­tralia, and wants more. It is also ex­pand­ing its pres­ence, with daily ser­vices to Bris­bane and the open­ing of a sec­ond main­te­nance fa­cil­ity. The Abu Dhabi-based com­pany has also re­newed its nam­ing rights at Dock­lands sta­dium in Mel­bourne for an­other five years.

In re­sponse, Ho­gan was por­trayed by Qan­tas dur­ing back­room brief­ings in Canberra in July as a play­thing of oil sheiks bent on de­stroy­ing our na­tional air­line. Qan­tas claims it was sim­ply lob­by­ing against Eti­had’s in­vest­ment in Vir­gin be­cause it was ham­strung in strik­ing sim­i­lar deals by ar­chaic leg­is­la­tion. But the be­hindthe-scenes at­tacks irked Ho­gan so much that he pub­licly picked a fight, ac­cus­ing Qan­tas of un-Aus­tralian be­hav­iour.

Ho­gan, 55, might have lived over­seas for two decades and now spends ev­ery sec­ond week­end in Lon­don, where he has a home and two sons, but he re­mains well versed in Aussie ver­nac­u­lar, sprin­kling the oblig­a­tory “mate” into con­ver­sa­tion.

Born and bred in work­ing-class Coburg, in Mel­bourne’s in­ner north, he has a house in the city, a fa­ther there who is still go­ing strong at 92 and a daugh­ter at univer­sity in Queens­land. He backs the Essendon Bombers (his brother played for the side) and loves a beer. His favourite? “It has to be VB, doesn’t it?” he says.

Is he still af­fronted at hav­ing been de­monised in a coun­try he con­tin­ues to call home? “Not at all. I have had the op­por­tu­nity to build from scratch an in­ter­na­tional air­line based in the Mid­dle East. What I have taken ad­van­tage of is a clean sheet of pa­per. Any air­line ex­ec­u­tive in my shoes would do ex­actly the same.”

Yet there is also an in­trigu­ing per­sonal el­e­ment to the Eti­hadQan­tas bat­tle. It is no se­cret that Ho­gan and Qan­tas chief Alan Joyce don’t get on. Joyce hinted as much last month in an­nounc­ing a 10-year part­ner­ship with Eti­had’s arch ri­val, the Dubai-based Emi­rates. Eti­had looked at a sim­i­lar deal with Qan­tas in 2008, but it was scrapped. Asked why a deal with a Mid­dle Eastern car­rier was right now and not ear­lier, Joyce said with a grin: “Chem­istry.”

Those who know Ho­gan say he has long had an am­bi­tion to run Qan­tas. When the air­line con­sid­ered ex­ter­nal can­di­dates to re­place then boss Ge­off Dixon in 2008, Ho­gan’s name came up, but was then dropped by Qan­tas chair­man Leigh Clif­ford. So what would be Ho­gan’s re­sponse af­ter all these years if he were asked to take on the top job at the Fly­ing Kan­ga­roo? “It is an in­ter­est­ing ques­tion,” he says af­ter a no­table pause. “When they give me a call, I’ll let you know the an­swer. But they haven’t called to date.” A minute later he adds: “I’ve been out of Aus­tralia for 21 years.

I am not sure what I could do back here, quite frankly.” Ex­cept for the Qan­tas job, per­haps? He de­clines to say more on the sub­ject.

One of his good friends is trans­port mag­nate Lind­say Fox, who sees Ho­gan when­ever he vis­its. Fox calls him a “very pos­i­tive, straight­for­ward in­di­vid­ual” and says they talk by phone at least once a month. Ho­gan has even asked Fox for ad­vice oc­ca­sion­ally. “He’s built a great team around him at Eti­had,” Fox says. “He is out­come-driven and that is the key to be­ing a good CEO.”

The bil­lion­aire is at a loss to ex­plain the criticism di­rected at Eti­had and Ho­gan. Com­pe­ti­tion, he says, is good. How­ever, Fox wor­ries Qan­tas may have sold the farm in its deal with Emi­rates. “I think it is a bit of a tragedy, when you con­sider that Qan­tas was one of the dom­i­nant air­lines in the world a few years ago.”

The gleam­ing glass fa­cade of Eti­had’s $US50 mil­lion cor­po­rate head­quar­ters, up the road from Abu Dhabi In­ter­na­tional Air­port, is a stark con­trast to the sur­round­ing desert. It is from here that Ho­gan over­sees 10,000 staff drawn from 120 na­tion­al­i­ties. The num­ber of staff will dou­ble in the next five years af­ter Eti­had, three years ago, signed one of the largest air­craft or­ders to date, for up to 205 air­craft worth $US43 bil­lion.

For many ex­pat staff, Eti­had is their life. They have moved their fam­i­lies to work at one of the world’s fastest-grow­ing air­lines. It would be a tough en­vi­ron­ment for any chief ex­ec­u­tive. When Ho­gan started as boss in 2006, he was told two things – be pa­tient and have re­spect.

“We are very hard-nosed on our busi­ness ob­jec­tives. But when deal­ing with peo­ple of dif­fer­ent na­tion­al­i­ties – English of­ten isn’t their first lan­guage; there are dif­fer­ent be­hav­iours, up­bring­ings – one has to be pa­tient and show re­spect, but get the job done.

“It is about be­ing vis­i­ble and hav­ing a cul­ture of fair­ness. I walk the cam­pus reg­u­larly, to see peo­ple, to talk to peo­ple. I prob­a­bly find out more in my three times a week walk­a­bout than I do in man­age­ment meet­ings. It is very im­por­tant to be en­gaged.”

Ho­gan says Eti­had is a mer­i­toc­racy – “It doesn’t mat­ter where you come from; if you are good, you are good” – and that he en­cour­ages peo­ple to ex­press their views. “We are en­deav­our­ing to cre­ate an open cul­ture, es­pe­cially given we have peo­ple from backgrounds where maybe you don’t say what you think. But I am find­ing that the un­der-35-year-olds are keen to ex­press their views, keen to see we live the vi­sion. I am proud that when I walk around peo­ple will come up to me. They call me James, we shake hands.”

Yet it’s hard to be­lieve some staff don’t find the chief ex­ec­u­tive’s head of­fice slightly in­tim­i­dat­ing. It’s huge, with model planes, flags and a full- sized board­room ta­ble. Vis­i­tors re­port that the pri­vate bath­room is some­thing to be­hold.

Some in the in­dus­try be­lieve Ho­gan is too hard on his peo­ple, with the ex­ec­u­tives clos­est to him in par­tic­u­lar re­quired to be to­tally ded­i­cated to the cause. But he makes no apolo­gies. “When I joined the air­line, in the very first meet­ing, I said to the small man­age­ment team that we were go­ing to be the world’s best air­line. They all looked at me like I was from an­other planet. But we laid out a very clear road map.”

He ac­knowl­edges he is tough, but is quick to add: “I am fair. I ex­pect peo­ple to meet their stan­dards, to de­liver on their KPIs. I ex­pect lead­ers to treat peo­ple with re­spect and lead. But if a tough de­ci­sion has to be made, it will be made.

“I run a global air­line. My key fo­cus in do­ing that is safety, to en­sure the stan­dards and pro­cesses are such that op­er­a­tionally there is no pos­si­bil­ity of er­ror. We have our stan­dards in ser­vice, which I ex­pect to be main­tained. Then we have our stan­dards in com­mer­cial and fi­nan­cial and net­work, which I also ex­pect to be achieved – and ex­ceeded.”

Does he ever lose his tem­per? An­other pause. “There are times when I lose my tem­per. When I lose it, it is more out of frus­tra­tion with my­self. I am not go­ing to go out and blast the work­force be­cause that isn’t go­ing to work in any busi­ness. It will be more about me be­ing an­noyed that we may have missed an op­por­tu­nity, or not de­liv­ered to the level the cus­tomers ex­pect. That is me los­ing my tem­per with my­self in a small group.”

He agrees that with such a wide cross- sec­tion of cul­tures in a very hier­ar­chi­cal so­ci­ety, he can­not af­ford to blow his stack out on the floor. “But I am a com­peti­tor. I work in many mar­kets of the world. I run a busi­ness that can be im­pacted by all sorts of things – war, pan­demics, etc. I drive hard.”

His great­est weak­ness: “Prob­a­bly want­ing to be there faster than we can get there. So it is back to that drive. Some­times you have to make sure the rest of the com­pany is mov­ing with you. If you get too far ahead, you lose fo­cus.”

So what hap­pens when peo­ple don’t meet his high stan­dards? Ho­gan is now warm­ing to the chat. He leans for­ward. His re­sponse is in­stant and un­qual­i­fied. “We have been very clear right from Day 1 that no mat­ter where you come from, whether it be Aus­tralia, the Mid­dle East, In­dia, Europe or wher­ever, if you don’t achieve, you leave. At the end of the year with our ap­praisal sys­tem ... the top 10 per cent get that added bonus. With the bot­tom 5 to 10 per cent, if it is their sec­ond time in that bucket, then we will phase them out of the com­pany. That’s a given within the busi­ness.

“I have a say­ing: If peo­ple see the train com­ing, it is a lot eas­ier to get on board with dig­nity and re­spect ... I’m a stick­ler for peo­ple see­ing the train.’’

But surely that is harder to fol­low in the Mid­dle East, with all its cul­tural com­plex­i­ties? “No, not at all,’’ he replies de­fi­antly.

One avi­a­tion in­dus­try vet­eran be­lieves Ho­gan has been the right man for the job, hav­ing had to push hard to build the busi­ness from scratch over the past six years. “But he wouldn’t get away with it in Aus­tralia,” he adds.

An­other ob­server puts it bluntly: “The Mid­dle Eastern car­ri­ers should not kid them­selves about where they have come from. They have the back­ing of the rich­est gov­ern­ments on the planet, no union is­sues to deal with and a clear man­date.”

In its sub­mis­sion to the Aus­tralian Com­pe­ti­tion & Con­sumer

Com­mis­sion about the Emi­rates deal, Qan­tas stated the labour costs of its Mid­dle Eastern part­ner as $US47,000 per em­ployee in 2009-10, whereas the fig­ure at Qan­tas was $US92,000. Emi­rates and Eti­had also re­ceive sup­port in the form of favourable tax regimes and gov­ern­ment-funded in­fra­struc­ture.

But Ho­gan feels no need to apol­o­gise for work­ing within the pa­ram­e­ters set by his masters. “That is the re­al­ity. If Alan [Joyce] and Qan­tas had been set­ting up a busi­ness in the past eight years, they would have set it up like I set it up. But peo­ple wouldn’t come and work for me un­less I paid them prop­erly and gave them op­tions to im­prove their ca­reers. And don’t for­get [they move] their fam­i­lies to the Mid­dle East. Our so­cial costs are far greater be­cause of hous­ing, ed­u­ca­tion and med­i­cal. It is a work­force that wants to do well, wants to win and wants the com­pany to make money.”

In 2008, CEO mag­a­zine named Ho­gan chief ex­ec­u­tive of the year and in 2010 awarded him its Visionary of the Year ti­tle, not just for Eti­had’s op­er­a­tional per­for­mance, but for work be­hind the scenes on cus­tomer ser­vice, staff con­di­tions, hous­ing and train­ing. And there is one thing even Ho­gan’s crit­ics agree on: He knows air­lines and he knows prod­uct and cus­tomer ser­vice.

Eti­had took a 30 per cent stake in em­bat­tled Ger­man car­rier Air Ber­lin last year and Ho­gan sits on the air­line’s board. It has also built a stake of al­most 3 per cent in Dublin-based Aer Lin­gus and a 40 per cent hold­ing in Air Sey­chelles. Air Ber­lin’s chief, Hart­mut Me­hdorn, has noth­ing but praise for his new part­ner’s in­dus­try ex­per­tise. “We like to have a pro­fes­sional on our board,” he says. “Es­pe­cially in dif­fi­cult days, you need air­line knowl­edge and air­line pro­fes­sion­al­ism. It helps you talk about things that have to be done and to set up your com­pany the right way.”

Ho­gan de­scribes him­self as “for­tu­nate” to have at­tended Mel­bourne’s pres­ti­gious Ivan­hoe Gram­mar School and as a teenager he worked at a tram­po­line/vol­ley­ball cen­tre to make a dol­lar. He started his busi­ness ca­reer in 1975 at Ansett Air­lines, be­fore de­cid­ing to try his luck abroad and sub­se­quently held se­nior po­si­tions with British Mid­land In­ter­na­tional (BMI), Hertz, Forte Ho­tels and Gulf Air, be­fore land­ing at Eti­had.

He says it was his fa­ther, Reg, whom he still talks to of­ten, who gave him the in­spi­ra­tion to take on the world. “The great thing about my fa­ther is that one of the val­ues I learnt as a kid was re­spect. As a kid grow­ing up, the abil­ity to play sport, to be fair-minded, to com­pete – all that came from my fa­ther. He was in the navy for a big part of his life. He taught me there are bar­ri­ers. He said: ‘Take the op­por­tu­ni­ties that are pre­sented to you.’ That is prob­a­bly why I left Aus­tralia 21 years ago.”

At Hertz in the 1980s, Ho­gan met John Borghetti, then gen­eral man­ager at Qan­tas Hol­i­days and to­day the chief ex­ec­u­tive of Vir­gin Aus­tralia. As al­liance part­ners, they talk at least once a week. “James is some­one who al­ways does what he says he is go­ing to do,” Borghetti says. “A hand­shake is as good as a con­tract. He is no-non­sense. All our dis­cus­sions are al­ways hon­est and frank.”

One part of Ho­gan’s ca­reer that re­ceives lit­tle at­ten­tion is the time he re­turned to Aus­tralia in 2001, af­ter two years as BMI’s chief oper­at­ing of­fi­cer, to over­see the Tesna con­sor­tium led by bil­lion­aires Lind­say Fox and Solomon Lew to ac­quire Ansett Aus­tralia from ad­min­is­tra­tion. “Solly and I se­lected him to be the CEO and he did a very good job to get the air­line up and run­ning,” Fox says of the pe­riod be­tween Ho­gan’s ap­point­ment as the chief ex­ec­u­tive and the col­lapse of the Tesna bid. In late Fe­bru­ary 2002, Fox and Lew walked away from the deal and the Ansett brand was con­signed to his­tory. Ho­gan qui­etly slipped out of Mel­bourne, but he soon found a new job, with Gulf Air in the Mid­dle East.

In his most ex­ten­sive com­ments to date on that pe­riod, Ho­gan is frank. “At the end of the day, it is the share­hold­ers’ pre­rog­a­tive to com­plete a deal. And the deal was not com­pleted. Solomon Lew and Lind­say Fox are both suc­cess­ful busi­ness­men. I still have a good re­la­tion­ship with them. At the end of the day, you have to move for­ward.

“I think it was hard for ev­ery­one, in­clud­ing the staff. Ev­ery­one in­volved wanted to com­plete the trans­ac­tion. I had started at Ansett. I would have liked to have seen the deal com­pleted.”

He still lauds Ansett’s cul­ture and its peo­ple. “I am for­tu­nate that quite a few of those peo­ple work with me at Eti­had to­day. And I have tried to take some of that cul­ture into Eti­had. Maybe in a lit­tle way that legacy and spirit of Ansett is within Eti­had.”

But Eti­had is a far cry from Tesna. Ho­gan might drive him­self to work in Abu Dhabi, but the trap­pings of wealth in the po­lit­i­cal and cor­po­rate worlds of the Mid­dle East are ex­treme. For­mer Leighton chief Wal King once called it “Dis­ney­land”.

“I don’t think we are treated like kings,” Ho­gan says. “We are treated like busi­ness­men. With any gov­ern­ment en­tity, whether it is here or in Sin­ga­pore, you are there to run a busi­ness. That is my job. As a state, Abu Dhabi is a wealthy state, and whether it’s this com­pany or one of the banks, all the en­ti­ties are expected to make a re­turn. And for the ex­ec­u­tives who run those en­ti­ties, the fo­cus on re­sults [and] gov­er­nance is just as strong as at any Euro­pean group I have worked for. If I were in a listed com­pany, I would ex­pect to be on a sim­i­lar pack­age.”

One critic claims Ho­gan’s ego is “so big you can’t step over it”. Ho­gan smiles. The crit­ics can say what they want, but the re­sults speak for them­selves. “I have been out of Aus­tralia 21 years, so peo­ple [here] don’t know me very well. At the end of the day, I have a board that sets my ob­jec­tives. In the past five years, we haven’t missed the num­bers. That’s what I’m paid to do.”

EMI­RATES’ LABOUR COSTS WERE $US47,000 PER EM­PLOYEE IN 2009-10, WHEREAS THE FIG­URE FOR QAN­TAS WAS $US92,000.

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