The wheel of fortune
The bosses of Australia’s major listed travel companies have experienced a roller coaster ride of riches in 2015 – with some dropping off the travelBulletin ‘Million Dollar Club’ list of travel agency executives with seven figure incomes – and others being inducted into the club. Qantas CEO Alan Joyce was the biggest winner with a massive package worth almost $12 million – but executives at both Helloworld and Flight Centre all took a haircut as the businesses failed to achieve targets.
Over at Helloworld, there’s perhaps little surprise that managing director and chief executive officer, Elizabeth Gaines has tendered her resignation and will depart before the end of the year. She took a pay cut of almost 50% during 2014/15, with a package worth $640,204 seeing her slip from ‘The Club’ this year. And forfeiting 100 per cent of her potential annual bonus. Gaines and her predecessor, Rob Gurney, both earned seven figure pay packets in 2013/14; with Gaines taking home a cool $1.1 million. It’s a different story this year, with the CEO receiving no bonus and her base salary eroded by some $90,000 due to the lapsing of “performance rights” because of her resignation, meaning Gaines took home about $640,000.
The curious outcome for Helloworld was that the company’s highest paid executive in 2014/15 was GM Air Services, Russell Carstensen, who was still a long way out of the million dollar club with a total package of $667,938 putting him just ahead of Gaines. And the company’s annual report also confirmed that Gurney took home more than $250,000 during the year despite stepping down as CEO in March 2014. Although no longer playing an active role in the company, he was still on the books due to the six month notice period in his contract. That also meant he technically stayed long enough for the payment of a sign-on bonus negotiated when he was appointed in 2012, in the form of 815,217 fully paid ordinary shares – worth about $236,000 – which were awarded on 29 August 2014.
Helloworld posted an adjusted profit before tax of $6.9 million, with the previously announced $205.3 million non-cash goodwill write-down bringing the overall result to a hefty loss of $198.4 million. The company said the adjusted profit before tax was a “significant improvement” on the previous year’s result, which was a $1.7 million loss. The group’s TTV declined three per cent to $4.69 billion, while revenue also dipped four per cent to $279.2 million. The “adjusted EBITDAI” figure used by the board to assess the financial performance of the business dived 32 per cent to $27.5 million, down from $40.6 million in the previous corresponding period.
Gaines said the company was anticipating a substantial increase in profit next year, claiming Helloworld is now positioned for long-term sustainable growth “with a strong balance sheet, a stable network of high-performing agents [and] a growing and strategic online presence”.
Carstensen was the only executive to receive a bonus, pocketing an extra $100,000 as a result of QBT winning the Whole of Australian Government contract in December 2014. Head of wholesale Peter Egglestone earned $347,801, scaled back slightly from the $373,392 he took home last year. Chief financial officer, Jenny Macdonald, appointed in August 2014, takes Carstensen’s position as the third highest paid executive in the Helloworld team with a $557,000 package.
Interestingly the Helloworld annual report also confirms significant changes to the company’s remuneration framework for 2016 following feedback from the previous year’s report, with no increases for senior executives and stronger performance conditions for short-term incentives, including no bonuses unless the company achieves targets for earnings per share.
Over at the other camp, Flight Centre announced a $366.3 million statutory profit before tax based on record sales of $17.6 billion. However, the company confirmed a market slowdown in Australia which in turn led to lower than normal TTV growth. The Australian business generated more than $250 million in EBIT for the third consecutive year, and was again the company’s main profit and sales generator. Flight Centre sees global growth prospects during 2015/16, and will target an underlying pre-tax profit of between $380 million and $395 million for the 2015/16 financial year.
Despite this, senior Flight Centre executives earned less during 2015, when “bottom-line results did not meet initial expectations” than in 2014 when the company recorded solid profit growth, with remuneration committee chairman John Eales highlighting the fact that CEO Graham Turner had been in the past judged “Australia’s best value CEO”.
Collectively Flight Centre’s six key management personnel earned $5.64 million this financial year. But only one of them – Chris Galanty, MD for UK and South Africa – remained in the Million Dollar Club, boosting his package by about $250,000 to $1.376 million. Galanty was the highest paid Flight Centre executive, taking home more than twice as much as managing director Graham Turner whose package was worth $541,000. Chief operating officer Melanie Waters-Ryan dropped out of the Million Dollar Club with remuneration of $986,000 while the company’s corporate operations chief Rob Flint also took a hit, with a package worth $580,000 down from $795,000 last year. Company secretary and AFTA director David Smith was just outside the Million Dollar Club with a package worth $962,000, up more than $200,000 on 2013/14.
Of course the statutory remuneration is only part of the picture for Flight Centre, with several of the senior team also holding significant shareholdings. In particular Turner’s stake of more than 15 million shares garnered dividends of just over $23 million during the year, and even with the recent decline in the company’s shares is still worth more than $560 million.
Scott Blume, boss of online travel agency Wotif, who entered the Million Dollar Club last year has dropped off the list following the delisting of Wotif on the ASX in November 2014, after being acquired by Expedia Australia Investment Pty Ltd – meaning details of his salary package are no longer public.
However he has been replaced on this year’s list by Mantra Group CEO and executive director, Bob East, following the company’s listing on the ASX in June 2014. East’s total remuneration of $1.27 million, comprising cash salary of $580,000, annual and long service leave payments, superannuation, and a whopping cash bonus of just over $600,000, sees him join the Million Dollar Club this year. His shares in the company totalled 2,315,638 at the end of the financial year.
Again almost all of the senior executive team at Mantra earned less in 2015 than in the previous year, despite FY2015 proving to be another successful year in the development of the company with a focus on portfolio growth in strategic aligned properties and destinations aimed at increasing shareholder value. This has been endorsed by the addition of 11 new properties to the portfolio, a well-supported capital raising of $56.7 million in March 2015; and an increase in Mantra Group’s share price by approximately 90 per cent, according the company’s annual report.
An outstanding performance was recorded by share market darling Corporate Travel Management (CTM) which posted a TTV (total transaction value) of $2.65 million, 92 per cent higher than the previous year driven by the integration of international acquisitions and organic growth in all markets. Travel income of $196.4 million was 80 per cent higher than the previous year. CTM’s statutory net profit after tax of $26.4 million for the year to 30 June 2015 represents a 67.1 per cent increase, compared with $15.8 million in the previous year. CTM’s total assets of $440.4 million at 30 June 2015, are an increase of $192 million, or 77.3 percent on the previous year. With a market value of more than $1.1 billion, it’s now firmly established in the benchmark S&P/ASX200 index alongside Flight Centre. In Australia and New Zealand, underlying EBITDA grew 19.5 per cent to $25.7 million on a 13.7 per cent organic increase in TTV, underpinned by internal productivity gains.
Managing director, Jamie Pherous, holds 21.5 million shares in CTM, a stake now worth about $216 million. Pherous received $671,988 in remuneration along with about $3.4 million in dividends. CTM’s market share in Australia, which is estimated to be about 11 per cent, has been creeping up through client wins even though the overall size of the market hasn’t grown.
Online travel agency, Webjet experienced a dramatic improvement in its fortunes in 2014/15, posting a growth in TTV of $299 million from $967 million to $1.266 million representing a 31 per cent increase over FY14. Revenue increased by $20.5 million to $119.1 million, representing a 21 per cent increase.
All three of its executive officers received bonuses, reinstating chief executive John Guscic’s position in the Million Dollar Club this year. Chief operating officer Shelley Beasley, who took home a much lighter pay packet last year as a result of missing out on a bonus, this year received a $99,334 bonus, earning a total of $470,286. However again despite a stellar performance the Webjet team didn’t receive all of their targeted bonus income, because the company didn’t achieve its ambitious budget.
On the aviation front, Qantas performed strongly in 2014/2015 to achieve its best result since before the Global Financial Crisis, enabling the group to both strengthen its balance sheet and resume shareholder returns.
The airline paid its chief executive, Alan Joyce, an eye-popping $11.8 million for his role in the turnaround. Joyce’s pay packet represents an increase of 490 per cent or nearly $10 million more than last year, when the Qantas Group recorded a $2.8 billion loss. The CEO’s statutory remuneration for 2014/2015 totalled $6.70 million. The CEO’s actual remuneration outcome, which includes $4.56 million of growth in the value of the vested shares to the CEO under the Long Term Incentive Program, totalled $11.88 million. Joyce also retains 5,379,721 shares in Qantas, up from 2,906,202 at the end of last financial year. This took him well and truly to first place on the Million Dollar Club table, ahead of last year’s leader, Flight Centre’s Chris Galanty.
Lyell Strambi and Simon Hickey, the former heads of Qantas Domestic and International, would have had their departures eased with hefty termination payments of $483,000 and $833,000 respectively – not to mention multi-million dollar pay packets for the eight months of the financial year prior to their stepping aside.
Across the ditch Air New Zealand CEO Christopher Luxon also had a good year, with a base salary of NZ$1.4 million and a bonus worth NZ$1.54 million, which along with other benefits saw his total package worth NZ$3.82 million.
Virgin Australia CEO John Borghetti was also well and truly in the Million Dollar Club – albeit not to the same extent as his chief rival Alan Joyce at Qantas. Perhaps reflecting the fact that Virgin Australia is still making significant losses, Borghetti received no increase in his $1.5 million base pay packet, but the pain of this was probably eased somewhat by a $1 million cash bonus, which along with other benefits and incentives boosted his pay packet to $2.84 million. He also received $37,500 in director’s fees but elected to donate this to a well-deserving charity.
Despite the airline’s losses, the Virgin Australia board decided to reward its senior team “given their success in continuing to position the company for long term sustainable performance and shareholder value” taking into account corporate scorecard performance and the achievement of individual performance objectives.
Borghetti wasn’t the only Virgin Australia executive to crack the million, with all five of his most senior staff also exceeding the magic number. Chief commercial officer Judith Crompton took home $1.053 million; chief operating officer Gary Hammes earned $1.482 million; chief financial officer Sankar Narayan earned $1.669 million; chief customer officer Mark Hassell took home $1.134 million; Virgin Australia regional airlines group executive Merren McArthur earned $1.193 million; and Velocity Frequent Flyer CEO Neil Thompson took home $1.174 million. Tigerair CEO Rob Sharp, who became part of the Virgin Australia executive team when the airline acquired the remaining stake in the low cost carrier for $1 in October 2014, had a package worth $749,000 for the last nine months of the financial year.
The wheel of fortune didn’t spin quite so favourably for executives at Regional Express, where general manager of Network Strategy & Sales, Warrick Lodge, took home a total of $183,587 – less than a tenth of Borghetti’s package and about one sixtieth of Joyce’s total income. Putting that into perspective, Alan Joyce earned Lodge’s annual income every single week. REX chief operating officer Neville Howell had a package worth $229,015, while REX executive chairman Lim Kim Hai, who’s also a major shareholder in the company, took no salary at all and elected to forfeit his director’s fee once again, meaning he has taken no payment for being on the board since November 2008 “in the light of the continuing difficult environment”.