Heads in the clouds

Airline execs fly high while passengers pay up

t does sometimes feel as though the global airline industry is being run by climate activists. Not if you’re travelling business or first-class, of course. But for those of us at the back of the plane it’s difficult to imagine Greta Thunberg doing more to discourage flying than what the management of major airlines are doing.

About seven or eight years ago there were signs that Ryanair CEO Michael O’Leary’s bare-bones approach to customer service was being adopted by the big global airlines.

At Ryanair, the cheap ticket price was just the beginning of your costs. It allowed you to get on the plane. You then had to pay for a seat (or risk the middle seat beside the toilet); then there was the luggage, which includes anything larger than a purse; finally, you paid not to be the last person to get on the plane. Inevitably, the advertised price of the ticket was about 25% of what the flight actually cost you.

And don’t think that paying extra for luggage means you can leave it with the check-in staff. You have to weigh, tag and deposit it on a conveyor belt and hope it ends up at your destination.

The trend to Ryanair-ise all air travel for economy-class passengers picked up during Covid. Management of the major international airlines realised how badly they could

Itreat passengers and not lose them. Not only treat them badly and force them to do all the additional stuff that Ryanair demands, but make them pay what would have got you a business-class seat a decade or so ago.

This is a roundabout way of getting to the AGM of 102year-old Qantas airline in Melbourne recently and Australia’s two-strike rule on remuneration.

By all accounts Qantas’s long-serving CEO, Alan Joyce, was an exceptionally tough individual. Unlike O’Leary, he wasn’t restricted by operating in a competitive market because Qantas enjoys a 60%plus market share in its home base. Also, unlike O’Leary, who didn’t so much push the envelope as completely redesign it, Joyce just tore the thing up. No surprise that the Australian Competition & Consumer Commission says Qantas was the company most complained about in 2021 and 2022.

The airline is under investigation for advertising and selling tickets for more than 8,000 flights that it had already cancelled, as well as for illegally sacking thousands of workers during Covid though it had received A$1.5bn from the government’s various schemes to protect jobs. Inevitably the sackings resulted in slower customer service.

When travellers complained, Joyce lambasted them for not being “match fit”. And there was the refusal to honour Covid-related flight credits. The grim list goes on.

However, Joyce’s robust approach did ensure the group’s balance sheet was in good shape at the end of Covid as well as enable the airline to report a A$2.5bn pretax profit for financial 2023 and a A$500m share buyback. Given the two previous extremely precarious years, the 2023 figures must have been a huge relief to shareholders. But you wouldn’t think it to look at the share price. It dropped 15% after the release of the results and was heading further south until Joyce, now hated by the Australian public, announced his early retirement.

And just to show they meant business, 83% of shareholders voted against the remuneration report. The highlight of the report was Joyce’s A$21.4m, which means he’ll never have to travel economy class. It would have been higher except the remuneration committee decided to hold back a little of the short-term incentives. There’s talk of clawing back some of the long-term bonus but that’s unlikely.

The shareholder vote was an advisory one, which has no consequences unless, because this is Australia, next year’s remuneration report also gets the thumbs down. Then under the “two-strikes rule” a vote is called to decide if all board members need to stand for reelection.

In South Africa, where we don’t even have a national airline to abuse us, the proposed new two-strike rule is a much more feeble affair. After two consecutive failed ordinary resolutions on the remuneration implementation report, remuneration committee members will only have to step down from the committee for two years.

So, two industries that could do with an overhaul airlines and remuneration.