Dixon and his cohorts on shaky ground

The collapse of the $11.1 billion bid for Qantas has raised questions about the future of chief executive officer Geoff Dixon and his senior management team.
Mr Dixon and chief financial officer Peter Gregg did not vote on the bid but later endorsed the board’s recommendation.
Along with other managers, they also stood to gain a significant windfall if a full takeover had gone ahead.

As well as a 1 per cent initial stake in the airline, Qantas management stood to gain a further 4.5 per cent stake if they met growth and performance requirements.

Management would have been eligible to buy into a pool of shares in Airline Partners Australia worth $160 million if they had met performance and time-based incentive hurdles.

The executive would pay the offer price of $5.60 and be able take any profit once the carrier was resold or through an exit formula.

The scheme, available to the airline’s 36 most senior managers, was in addition to the 1 per cent stake they received by rolling over $36 million in existing Qantas entitlements into APA.

Mr Dixon had decided to forgo most of his windfall and donate up to $60 million to charity.

However, he had publicly supported the bid and said he was looking forward to dealing with owners who had an outlook that went beyond the quarterly orientation of the market.

He was also not unhappy about removing Qantas from some of the intense scrutiny it receives.

Questions will now be raised about whether the management team should – or will – stay.

There had been rumours that several senior executives – including Jetstar CEO Alan Joyce – could leave if the bid failed.

Mr Dixon faces the task of holding together his team, considered among the best in the industry, in the face of the bid’s failure.

He also faces the task of keeping them and the airline’s 38,000 workers focused on the job of running Qantas after the destabilisation of the past six months.

Mr Dixon admitted last night that the deal’s failure would be unsettling for management but said the company was in good shape. It was a case of “having to turn around and keep moving”, he said.

Analysts and other industry observers were mixed yesterday on how damaging management’s support for the bid would be.

MM&E co-founder Tom Elliott said the executives had staked their careers on the deal’s success.

While he did not believe shareholders would want Mr Dixon to resign, there would be serious questions and “a lot of red faces”.

“At Atlinta, when the chairman and the CEO and a few other execs got involved in a buyout, they all got sacked and haven’t been reinstated,” he said. “So what happens to Geoff Dixon and all the others? What happens to (chair) Margaret Jackson?

“I don’t see why (Mr Dixon’s) position is any different to the guys at Alinta. Just because it was a so-called friendly bid is neither here nor there.”

Centre for Asia-Pacific Aviation executive chairman Peter Harbison said he believed an expected fall in the value of Qantas shares could pose a problem for Mr Dixon.

He said this could see the chief executive walk away from the airline and he believed Ms Jackson would have to leave.

BBY analyst Fabian Babich said the situation for both Mr Dixon and Ms Jackson was now tenuous and they would have to do some fast talking to convince investors that their motivation was in no way diminished.

“They’d be on the back foot and they would need to convince investors that they are of the mindset to continue working with the company the way it is and to give the company their all,” he said.

“It really depends on how convincing they are with those words as to whether or not they stay or go.”

Unions also had mixed feelings about management’s role in the bid.

Australian Services Union assistant national secretary Linda White said she could not see how the board could possibly remain but she was less convinced that management would go.

“I think they’re reasonably good management but I think they’ve backed this bid fairly heavily,” she said. “But the board is more heavily compromised than the managers, to be frank.”

But Australian & International Pilots Association president Ian Woods said management’s credibility was damaged.

“Management have a real difficulty because they are closely associated with the bid,” he said.

“They are seen to be hypocritical and as AIPA’s president I would be concerned that management now lacks credibility to lead.”

What ultimately might work in Mr Dixon’s favour is his track record running Qantas and the pugilistic street smarts that earned him the nickname “the junkyard dog”.

That Qantas weathered the issues that had hammered airlines for the past six years and emerged in a stronger position was why APA made the deal contingent on Mr Dixon and his management team staying with the airline