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Originally published July 21, 2013 at 8:04 PM | Page modified July 23, 2013 at 6:32 AM

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CEO Joyce stirs controversy as he remakes Qantas

The Australian airline’s Irish-born CEO’s pact with former nemesis and competitor Emirates has divided stakeholders in the company.

Bloomberg News

Alan Joyce, CEO of Qantas

Age: 47

Education: Studied mathematics at Trinity College.

First flight: Joyce didn’t take a flight until he was 22, when he traveled business class from Dublin to Chicago as a graduate recruit at Aer Lingus Group.

Source: Bloomberg

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Alan Joyce’s visit to the posh Wolgan Valley spa on a crisp day in May last year was no holiday. For the chief executive of Qantas Airways the exclusive resort in a wilderness west of Sydney, Australia, was hostile territory.

Wolgan Valley belongs to Emirates, a company former Qantas Chairwoman Margaret Jackson once called aggressive and unfair. Over the past decade, the Dubai-based carrier had increased its share of traffic to and from Australia by a factor of more than 20, helping push Qantas into a $410 million annual loss on international routes.

Ready to call a truce, Joyce was meeting with Emirates President Tim Clark to discuss a tie-up finally implemented in March.

“We really didn’t have anybody else that was willing to engage with us,” the Irish-born executive said, of a deal homegrown predecessors had spurned.

With the Emirates link, Joyce turned his back on British Airways, Qantas’ partner since 1935, shifted its hub for European flights from Hong Kong and Singapore to Emirates’ home base in Dubai, and attracted the opposition of his predecessor in the job, Geoff Dixon.

Investors supported Joyce. Qantas shares have rallied about 40 percent since June 11, 2012, when Clark revealed the carriers were discussing a “commercial arrangement.” In November, 99 percent of voting shareholders backed a pay package giving Joyce, 47, the highest salary of any airline chief executive, even as the carrier slipped to its first-ever annual loss.

“Do we think he’s making the right decisions? The answer is yes,” said Andrew Sisson, managing director of Franklin Resources’ Balanced Equity Management Pty., the company’s third-largest shareholder. The Emirates alliance “was a better deal than would have been obtained via the alternatives,” he said.

Three months into the pact, the Irish-born executive is steering the company nicknamed “The Flying Kangaroo” back to health. Under the deal with Emirates, the pair have aligned loyalty programs, booking systems, and flight codes. Emirates now operates more flights from Australia to Europe than Qantas.

The stock is down since Joyce took over in November 2008. Still, the Australian carrier’s share price, at 36 times its forecast earnings for the year ended June 30, gives it the highest valuation of any airline worldwide, according to data compiled by Bloomberg.

Not everyone welcomed the change. His predecessor Dixon formed an investor group “committed to unraveling Qantas’ structure and direction,” including changing the Emirates alliance, the Australian carrier said in an emailed statement. Joining Dixon was Peter Gregg, Qantas’ former chief financial officer, who announced his departure a month after Joyce was appointed to the top job.

The group sold its Qantas stake in January, the Australian Financial Review newspaper reported without saying where it got the information.

Joyce grew up far removed from the Australian icon, in a working-class family in the Dublin suburb of Tallaght. He studied mathematics at Trinity College and didn’t take a flight until he was 22, when he traveled business class from Dublin to Chicago as a graduate recruit at Aer Lingus Group.

“Coming from a lot of different jobs in my career — coming from a different background, coming from different airlines — does help, in terms of your focus and thinking,” Joyce said in an interview. “I’d never had any intention of going into the aviation industry.”

He’d picked the Aer Lingus job from a newspaper help-wanted ad because it required expertise in operations research, the branch of mathematics in which he’d done a master’s degree at Trinity. He came to Australia in 1996 “to experience life offshore,” he said, and by July 2003 had been picked by then-Qantas CEO Dixon to establish a budget arm, Jetstar, to compete with Virgin Australia Holdings, then known as Virgin Blue.

Jetstar, which made its first flight in 2004, accounted for 29 percent of the Qantas group’s passenger traffic during 2012.

It’s the region’s second-biggest budget airline on that measure after AirAsia, according to data compiled by Bloomberg.

In his five years as CEO, Joyce has also faced union opposition to his efforts to limit labor costs, which made up 28 percent of revenue in the most recent calendar year. After pilots, engineers and baggage handlers staged strikes in 2011, Joyce grounded the carrier’s entire global fleet, stranding about 80,000 passengers for two days.

“Qantas is not growing, the subsidiaries are growing,” said Richard Woodward, vice president of the Australian International Pilots’ Association, which represents about 1,700 long-haul pilots.

Joyce’s $2.2 million salary for the fiscal year ended June 2012 was the highest for any publicly traded airline chief executive worldwide, according to data compiled by Bloomberg. His total compensation, $5.8 million including bonuses, is the biggest pay package for any of his peers outside the U.S., trailing only the top executives of Delta Air Lines, AMR, United Continental Holdings and Alaska Air Group.

Right now, Joyce is confident about the direction Qantas is heading. Net income for the fiscal year ending June 2014 will rise to its highest level under his tenure, according to the average of eight analyst estimates compiled by Bloomberg.

Bookings to Europe were up sixfold when Qantas and Emirates started joint flights March 31.

New flights into Singapore, where Qantas opened a new lounge in April, are also filling up fast.

“This is the best job I will ever have,” Joyce said. “I’m a very lucky guy.”

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