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Qantas' Strategy to Reboard Passengers


CEO Alan Joyce gets kudos for deft handling of a crisis after one of the carrier's Airbus 380s had mid-air engine explosion

On Nov. 27, less than a month after one of Qantas Airways' Airbus A380s had a midair engine explosion, the airline sent its first 450-seater back into service for a Sydney-to-London flight. Despite the Nov. 4 blowout and subsequent problems with other of the fleet's A380s, one passenger was particularly eager to board this flight: Alan Joyce, Qantas' 44-year-old chief executive officer.

Joyce's flight followed a media blitz of five press briefings, at least six radio and television interviews, and a YouTube video address. In an e-mail response to questions, Joyce noted that "During crisis situations you can never communicate enough."

Hours after the Nov. 4 incident, Joyce grounded Qantas' six A380s. (The cause of the engine explosion is still being investigated by the Australian Transport Safety Bureau.) His swift action and heightened visibility have helped Sydney-based Qantas retain travelers' confidence, says Robert Heath, a crisis management consultant and professor at the University of South Australia.

Investors are less assured: Qantas' stock has fallen 10.8 percent since Nov. 3 in Sydney trading, compared with a 3.2 percent decline for the benchmark S&P/ASX 200 index. Even so, UBS (UBS) analyst Simon Mitchell on Nov. 23 affirmed a buy rating on the airline, a recommendation made by 12 of the 14 analysts tracked by Bloomberg.

Joyce's management of the crisis began with a televised press conference on Nov. 4 after the A380 made an emergency landing in Singapore. The Rolls-Royce-powered aircraft touched down with the rear of an engine cover blown away from the explosion and damage to a wing and its fuselage. No one on board was hurt. Since then the carrier has used substitute planes, including Boeing (BA) 747s, to maintain services usually flown by the A380s.

In early December, a second Qantas A380 will start flying, followed by two new ones within the month. Qantas is working with Rolls-Royce Group on modifying as many as 16 engines.

The Qantas CEO's actions contrast with Toyota Motor (TM) President Akio Toyoda's handling of U.S. recalls that began last year. Toyoda didn't hold a press conference after the company announced defects with 3.8 million vehicles in September 2009. He waited more than a week to give a briefing after a separate recall in January. Instead, U.S. sales chief James E. Lentz and Executive Vice-President Shinichi Sasaki spoke for the company. The Toyota brand's share of U.S. auto sales fell to 13 percent in the first 10 months of 2010 from 15 percent in 2009. "Toyoda really should have been out in front from the beginning," says Tadashi Usui, a Tokyo-based analyst at Moody's Japan.

Joyce, Qantas' CEO since 2008, gets high marks for management from Conor McCarthy, a former colleague at Aer Lingus who is now CEO of aircraft maintenance firm Dublin Aerospace. "He gets people to raise their game," says McCarthy. "I think customers will have a lot of confidence he was making the right decisions."

Good decisions won't matter if more engine troubles crop up. A Qantas Boeing 747 returned to Singapore because of an engine fire on Nov. 5, and at least two other Qantas planes have turned back since because of trouble. While Ron Bishop, senior lecturer in aviation technology at Central Queensland University, is impressed by how Qantas has handled events, any more faults and "everybody around the world will be looking at Qantas and asking themselves questions," he says.

The bottom line: The Qantas CEO's swift damage control in the wake of an Airbus 380 midair engine blowout has impressed crisis consultants.

Fenner is a reporter for Bloomberg News.

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