SYDNEY (Reuters) - Qantas Airways Ltd (QAN.AX) said on Monday Alan Joyce will take over as chief executive, taking the baton from Geoff Dixon who steps down after a string of belt tightenings as world airlines battle soaring fuel bills.
Joyce, an Irishman who has headed Qantas’ no-frills carrier Jetstar since 2003, takes over as soaring fuel costs have threatened profits across what Dixon has described as “one of the toughest industries.”
U.S. airlines have cut tens of thousands of jobs and at least seven smaller U.S. airlines have filed for bankruptcy stopped operating this year.
“Cost is vital and Alan’s had exactly that experience in his running of Jetstar to date. His performance at Jetstar has been very good,” said Angus Gluskie, portfolio manager at White Funds Management.
“He seems to be a fairly down to earth person whose focus is on getting the best out of the business and there’s not too much ego involved,” he said.
This month Qantas axed 4 percent of its workforce and scrapped growth plans. It was the airline’s fifth cost cutting measure in three months.
Just days before the job cuts were announced Dixon, chief executive since 2000, told his staff they were in “the greatest crisis in aviation history” as airline fuel bills soar.
“We are in uncharted territory. This is...bigger than the Gulf wars, the attacks of September 11, 2001, severe acute respiratory syndrome and past oil shocks,” Dixon said in a memo to staff on July 15.
Crude oil, which hit a record $147.27 a barrel earlier this month, is still up near $124. World airlines stand to lose more than $6 billion this year if fuel costs remain around current levels, the International Air Transport Association estimated.
Compounding rising costs, Qantas, which has never had a fatal crash, was ordered on Sunday to check all its Boeing 747s after investigators said an exploding oxygen bottle might have ripped a hole in a Qantas 747, forcing an emergency landing at Manila on Friday.
Qantas is expected to report a 40 percent rise in net profit for its fiscal 2008 ending June, but net profit for the current year is forecast to nearly halve due to the tough operating environment. The results are due on August 21.
“Qantas, despite the problems, is one of the most profitable airlines in the world so to promote from within the same umbrella makes a lot of sense,” said Michael Heffernan, senior client adviser and strategist at Austock Stockbroking.
“Jetstar hasn’t been doing too badly. I would say it’s a good move,” he said.
Joyce, 42, has worked in aviation for 20 years, spending around 15 years in leadership positions at Qantas, as well as at the now defunct Australian airline Ansett and Ireland’s Aer Lingus AERL.I, where he spent eight years.
Addressing journalists, he promised “a continuation of a lot of the strategies Geoff has employed. The key message is continuity.”
Shares in Qantas were down 1.7 percent at A$3.43 on Monday in a broader market down 1.2 percent . Qantas traded above A$6 in October last year.
Joyce said fuel prices were “the major challenge to the business” and that he planned to continue “enhancing and utilizing the two brand strategy” of the Qantas full-service and Jetstar no-frills services.
“Now’s not the time to jump out there and do something radical, at least for a few months,” said Gluskie.
Still, Dixon and Joyce both said they saw further industry consolidation down the track.
Joyce will take over when Dixon steps down after the annual shareholder meeting in November, Qantas said. Joyce will join the board immediately.
Reporting by Miranda Maxwell; Editing by Dhara Ranasinghe