Million dollar club

The last month has seen Australia’s publicly listed travel companies release their annual reports, providing a glimpse into the details of their operations – including the sometimes lofty salary packages of their key management personnel. In travelbulleti

Skin in the game appears to be the theme for this year’s travel industry Million Dollar Club. While a seven figure base salary might be nice, not one of the travel agent members of the club reached the magic million-dollar milestone on their regular income alone. In fact a key trademark of all the big earners for 2015/16 was that they took home a significant chunk of their pay packets in the form of dividends. This year we have analysed the figures based on industry sector. Given the variety of operators in the industry and what they do we thought it was probably better to group suppliers such as airlines and hoteliers separately to those occupying other parts of the distribution chain, such as travel agents.

Travel agents

Across all sectors the overwhelming leader of the pack this year was Flight Centre founder and managing director Graham ‘Skroo’ Turner. His total remuneration amounted to a whopping $23.8 million – easily eclipsing all the other players including the highly paid Qantas chief Alan Joyce and his rival at Virgin, John Borghetti, not to mention Air New Zealand CEO Christopher Luxon. Interestingly, however, looking at just regular monthly income, Turner’s base salary of $380,000 was the lowest of everyone in the Million Dollar Club this year. He did receive a $294,000 bonus which lifted his salary to $675,000 – but that was mere pocket change considering the $1.52 per share in dividends declared by Flight Centre during the year. Turner holds more than 15 million Flight Centre shares, meaning his dividend cheques amounted to $23.1 million – a very tidy sum in anyone’s terms. Flight Centre chief operating officer Melanie Waters-ryan made a return to ‘The Club’ this year, with a share-based bonus worth more than half a million dollars, while her personal 85,725 share stake in the company boosted her income by over $130,000 meaning her total income was more than $1.3 million for the year. Other Flight Centre staffers in the 2016 Million Dollar Club include Chris Galanty, executive general manager Europe and South Africa on $1.38 million and executive gm The Americas Dean Smith, whose income was $1.24 million. On the topic of skin in the game, much has been made of the Helloworld merger with Andrew and Cinzia Burnes’ AOT group which took effect from February this year. The massive deal saw the Burnes’ definitely put their money where their mouth is, with the pair now holding 40% of Helloworld. That gives them a strong incentive to produce share price growth and dividends – and had an immediate back pocket effect on other senior staff. As the Helloworld annual report delicately put it, the Board has implemented changes to remuneration strategy. “One key factor has been to right size the level of executive remuneration for an organisation of our size,” the report said. That was reflected in lower pay for Andrew Burnes as CEO and Cinzia Burnes as executive director, with both receiving just over $210,000 each since assuming their new roles in February. Helloworld also paid its first dividend in some years, with a 2c per share payment boosting the Burnes’ combined total income by almost $900,000 based on their 43 million shares. However given they were only running Helloworld for five months, that still wasn’t enough to put the pair into the Million Dollar Club this year. Helloworld’s new executive remuneration structure looks to have particularly impacted the future base salary of the company’s head of Air Tickets and QBT, Russell Carstensen who this year took home $786,000 including a base salary of $550,000. The HLO annual report notes that “Russell Carstensen’s base salary has been recalibrated… and will be $450,000 per annum from 1 September 2016”. Somewhat easing the pain would have been a $233,000 bonus he received for 2015/16 – a short term incentive awarded in 2015 but only paid

Russell Carstensen’s base salary has been recalibrated... and will be $450,000 per annum...

last year. Carstensen’s 84,000 share stake in Helloworld did boost his total package this year – but only by $1,685. Other big earners at Helloworld in 2015/16 included former CEO Elizabeth Gaines who took home $537,000 including a $187,000 bonus relating to the successful completion of the merger with AOT. Jenny Macdonald, Helloworld’s former chief financial officer was paid $693,000 including bonuses totalling $168,000. The company noted its executive remuneration expenses are “anticipated to be substantially reduced from 2016” both as the result of a smaller senior management team and the salary realignment. Corporate Travel Management founder and CEO Jamie Pherous was another big earner this year, coming in behind Graham Turner in second place in the travel agency Million Dollar Club. Pherous, who has presided over massive growth at CTM, had a base salary of $459,000 plus a $250,000 bonus giving him a take-home salary of just over $700,000. But again Pherous has a significant stake

in CTM – 21.5 million shares in fact, and the company paid total dividends of 19c per share meaning he topped up his income by a cool $4.08 million, giving him a total package of almost $4.8 million. The company’s global chief operating officer Laura Ruffles also just scraped into the Club this year with a base salary of $516,000 a $300,000 bonus and other extras taking her package to $997,000 – while her 127,000 shares earned another $24,000 on top meaning her total income was $1.02 million. The other major Australian listed travel agency is Webjet, and CEO John Guscic was well and truly in the Million Dollar Club this year. Guscic had the highest base salary among all of his listed travel agency CEO peers, with a figure of $815,000. During the year he was also paid bonuses and other add-ons which brought his total package to $1.56 million. But again he also has more than 1.1 million shares which received a 14.5c dividend in total, adding another $160,000 to his income for the year and taking it to just under $1.7 million. Expect that to change significantly next year, after the Webjet board implemented an arrangement whereby the company has provided Gucsic with a $1.5 million non-recourse loan to allow him to exercise previously granted options. “The loan was for the specific purpose of assisting the Managing Director to build and retain a progressive equity interest in the Company and therefore provide a vital component of long term retention and an alignment of long term shareholder values,” the Webjet annual report confirms.

Airlines

Much has been made in mainstream media of Alan Joyce’s pay packet, which this year soared to more than $13 million. Much of the increase can be attributed to the carrier’s transformation which has in turn boosted the Qantas share price and saw it pay a dividend for the first time in many years. Qantas also shared the spoils with many of its employees and it seems somewhat churlish to begrudge Joyce the fruits of his labour. He was the highest paid airline executive in the Million Dollar Club, with a base salary of $2.1 million, a very healthy $3.26 million bonus based on achieving key performance indicators, and share-based payments amounting to a further $7.6 million giving

him a total package of $12.96 million. Again, Joyce has a not inconsiderable shareholding in Qantas of 2.9 million shares, meaning the 7c per share dividend netted him a further $209,000 bringing the CEO’S total income from Qantas to $13.2 million. Other Qantas executives also did well, with chief financial officer Tino La Spina, head of domestic Andrew David, head of International Gareth Evans, Loyalty CEO Lesley Grant and Jetstar chief Jayne Hrdlicka also all ending up firmly in the Million Dollar Club this year. Gareth Evans and Jayne Hrdlicka were the leaders of this pack with $4.3 million packages, both significantly fattened by performance-based bonuses and incentives. Grant took home a total of $2.8 million, followed by La Spina on $2.4 million and David on $2.37 million for the year. Again all these executives have shareholdings in the company meaning the Qantas dividend saw them top up their incomes by amounts varying from $7,000 (Hrdlicka) through to $40,000 (David). Air New Zealand is listed both in Australia and New Zealand, where the rules about disclosure of executive remuneration are slightly different. CEO Christopher Luxon received a base salary of NZ$1.47 million plus a further $1.6 million bonus and other payments which took his package to NZ$4.7 million for the year. Again he has a considerable Air New Zealand stake amounting to almost 1.7 million shares meaning the carrier’s healthy 45c per share saw this boosted by a further $754,000 taking his income to NZ$5.47 million for the year. Luxon is the only senior Air NZ executive to have his payments specifically identified, with the Air NZ report instead tabulating the other top earners anonymously. Within the carrier there are seven New Zealand-based senior executives in the Million Dollar Club, with payments ranging from NZ$2.2 million down to $1.04 million. It is not possible to identify who these are, but we can speculate - the Air NZ corporate website identifies the most senior roles as being held by chief sales and commercial officer Cam Wallace, chief financial officer Rob Mcdonald, chief operations officer Bruce Parton, chief flight operations and safety officer Captain David Morgan, chief marketing and customer officer Mike Tod and Stephen Jones, chief strategy, networks and alliances officer. Finally the other listed airline with executives in the Million Dollar Club is of course Virgin Australia. The carrier’s annual report, released just before this issue of travelbulletin went to print, indicates CEO John Borghetti took home a healthy $2.86 million. It’s been a big year for Borghetti, and he well and truly earnt every penny of it as he managed a board in transition, significant new shareholders and the carrier’s capital restructure – but with Virgin Australia not declaring a dividend last year he didn’t get any additional income from his 1.9 million share stake in the airline. There have also been significant changes in Virgin Australia’s senior ranks in recent weeks with the departure of Judith Crompton who took home $900,000 last year. Other Virgin Australia Million Dollar Club members include Merren Mcarthur, Group Executive regional and cargo whose package was worth $1.04 million, chief operating officer Gary Hammes (also departing) who earned $1.02 million and Tigerair Australia chief Robert Sharp who took home $1.06 million.

Other listed travel companies

The rest of our travel Million Dollar Club members come from a mixed bag of industry suppliers, including hoteliers, insurance companies, transport operators and attractions. Top of the list was Jeff Ellison, CEO of Sealink Travel Group who presides over the company’s portfolio of Kangaroo Island tour operations, Captain Cook Cruises on Sydney Harbour and other ferry services around the country. Ellison had a base salary of $469,000 topped up with bonuses and other payments meaning his salary package amount to $794,000 for the year. However he also holds more than five million Sealink shares which each attracted a 12c dividend in 2015/16, boosting his income to $1.46 million for the year. Mantra Group CEO Bob East was also in The Club, with a base salary of $612,000 and other payments which took his package to $1.3 million. On top of this his 1 million plus shareholding netted a further $101,000 in dividends so he came in with a total of $1.43 million. Event Hospitality, parent company of Rydges Hotels and Resorts and NSW ski resort Thredbo, changed its name from Amalgamated Holdings during the year, with CEO David Seargeant taking home $5.6 million for the year as he oversaw the group’s diverse portfolio. Rydges md Norman Arundel was just outside the Million Dollar Club with a total income of $938,000 for the year. Former Cover-more Travel Insurance CEO Peter Edwards, who stepped aside in July, also just missed out on being in ‘The Club’ with a total package including share dividends of $981,000. Next year it will be intriguing to see whether Judith Crompton, who will next month join Cover-more to head up its Travel and Aviation division, will once again end up in the Million Dollar Club in 2017.