In nosedive, Qantas CEO Joyce may find path to safety

Thu Feb 27, 2014 4:19pm EST
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By Jane Wardell

SYDNEY (Reuters) - Whether through error or circumstance, Qantas Airways Ltd's (QAN.AX: Quote) spectacular fall from grace is giving chief executive Alan Joyce his best chance of steering the airline toward long-term salvation.

Joyce has called on the Australian government to help the national flag carrier in its hour of need. If Canberra is convinced Qantas is in peril, it may have little option but to abandon decades of resistance and provide state aid.

The executive needs little help making a convincing case: losses from a domestic price war and international competition are piling up; Qantas is now worth only half what it was when Joyce took the helm in 2007; and its credit rating is now junk across the board.

The A$2 billion cost savings and 5,000 job cuts Joyce announced on Thursday represent the airline's most radical shake-up since it was privatized in 1995.

As yet, Prime Minister Tony Abbott appears unmoved by Joyce's plea for the government to offer a debt guarantee that would lower Qantas's costs. A change in laws to allow more foreign investment to flow into Qantas, as it has done to rival Virgin Australia Holdings Ltd (VAH.AX: Quote), is a longer-term proposition.

Yet Qantas still has plenty of cash to keep it afloat pending changes, as well as inevitable disputes with trade unions over cutting 15 percent of the carrier's workforce.

As Joyce's calls for state support grow louder, so too does criticism of the way he has run the airline. The spotlight on his management has spurred some to call for his resignation.

"The only way for Qantas to get out of this nosedive is for Alan Joyce and the board to resign," said lawmaker Nick Xenophon.   Continued...

Two Qantas passenger jets cross each other at Kingsford Smith International airport in Sydney June 27, 2013. REUTERS/Daniel Munoz