how a Qantas coup was hatched

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December 1, 2012

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Matt O’Sullivan

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Investors met at the office of venture capitalist Mark Carnegie to agitate for a board shake-up.

Investors met at the office of venture capitalist Mark Carnegie to agitate for a board shake-up. Photo: Janie Barrett

IT WAS an ”urban oasis” in the upmarket Sydney suburb of Paddington where a covert plan was hatched to agitate for a big shake-up at Qantas, including an overthrow of management.

The fallout from secret briefings in the offices of the venture capitalist Mark Carnegie climaxed this week when the Qantas chief executive, Alan Joyce, publicly turned on his former mentor Geoff Dixon, accusing him of being part of the gang of four that has sought to undermine him.

In a shock-and-awe strategy reminiscent of his grounding of the airline late last year, Mr Joyce sought to have Mr Dixon removed as Tourism Australia chairman because of his ”untenable potential conflict”. More importantly, it was an attempt to flush out the renegade investors.

So far, the rebels have stayed silent in public. Mr Carnegie would not talk when Fairfax Media visited him at his Balinese-style office on Friday. It was here that Mr Carnegie briefed the influential long-haul pilots’ union in early September.

The cold war between Qantas management and the group of well-connected businessmen including Mr Dixon, adman John Singleton and former Qantas senior executive Peter Gregg threatens to drag on for months despite Mr Joyce’s attempts to bring it to a head.

The tourism industry is the latest casualty of the standoff following Qantas’ decision to cut off funding to the peak federal tourism body for marketing campaigns.

Although Qantas has promised to redirect its money to state bodies, tourism insiders say a united national voice is crucial to selling Australia as a destination.

Tourism Australia’s board has pledged its full support for Mr Dixon despite Qantas demanding he resign as chairman or disassociate himself from the renegade investors. Importantly, the federal Tourism Minister, Martin Ferguson, has backed the board’s decision.

Mr Dixon has also found an ally in his former Qantas colleague, John Borghetti. On Thursday night, Mr Dixon met Mr Borghetti, who is now the boss of Virgin Australia, over a pinot noir at the swish Rockpool Bar Grill in Sydney’s CBD.

The pair talked about Virgin broadening its funding commitment to Tourism Australia, which will go a long way to filling the gap left by the exit of Qantas.

It leaves Qantas bereft of a resolution to a slow-burn agitation strategy from the circling investors.

Straight out of the US playbook of ”shareholder activism”, the group’s plans centre on it winning support from at least 20 per cent of Qantas shareholders in order to gain board seats and push for a major change in the airline’s direction.

With Qantas’ share price still hovering near historic lows, the high-profile investors sense an opportunity to ”unlock value” through a partial sale of Jetstar or the Frequent Flyer division.

Although those who have been briefed are wary of the investors because of their links to the botched $11 billion private equity bid in 2007, they have not been opposed to hearing their alternative plans.

”I am not going to say we won’t speak to anyone in the future. My concern is the future of the airline and our members. I don’t think we should be precluded from speaking to anyone,” Barry Jackson, president of the Australian and International Pilots’ Association, said. ”If Alan [Joyce] was doing something fantastic for us and he was performing admirably, there is no reason for this to happen.”

Whether the rebel investors’ plans will gain momentum is still uncertain, but it has left the tourism industry stunned and has ended in spectacular fashion what was once a close personal relationship between Mr Dixon and Mr Joyce.

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