Travel’s fat cats looking skinny
THE pay packets of executives leading Australia’s travel and tourism companies are looking relatively scrawny this year, with the impact of COVID-19 seeing some changes at the top of travelBulletin‘s annual Million Dollar Club listing. With massive layoffs, job cuts and stand-downs across the board, many of those at the top have also shared in the pain, and the belt-tightening looks set to continue for some time yet. Bruce Piper investigates.
This time last year the travel and tourism industry was riding high after a strong 2018/19 financial year. Booming inbound and outbound numbers meant plenty of opportunity to make money within the sector, and record profits were being recorded by Australia’s publicly listed travel, hospitality, aviation and holiday groups. In turn they were paying shareholders strong returns, and the prosperity was also reflected in some stunning pay packets at the top end.
Fast forward to 2019/20 and things aren’t quite so rosy — however it should be noted that the pandemic only hit in the final third of the year when the industry ground to a screeching halt and then into a rapid reverse.
So while that led to a haircut for many executives who took significant pay cuts amid the onset of coronavirus, it was preceded by eight months of strong trading, including normal dividend payouts for several companies — while others even continued to pay dividends as the travel world imploded.
Flight Centre Travel Group MD Graham Turner has long been at the top of the Million Dollar Club, with the travel agency powerhouse producing exceptional results for investors over many years. In fact 2018/19 was an absolute standout for Flight Centre shareholders — and of course that meant a big benefit for Turner himself who has a major stake in the company. A one-off special dividend, on top of the company’s normal payouts, boosted his total remuneration to an eye-watering $48 million for the prior 12 months (travelBulletin October 2019). Things are somewhat different this year, with only a single dividend payment during the year, and then a pay cut across the board for Flight Centre execs, meaning that he had to settle for “only” $17 million-odd in 2019/20 — around a third of his income the previous year. And while that still left him at the top of the travelBulletin Million Dollar Club, Turner is also noteworthy as one of those who took the biggest cuts year-on-year, with a 65% drop.
That was somewhat of a contrast to the Flight Centre chief’s industry peers Andrew and Cinzia Burnes at Helloworld Travel Limited. Again being major shareholders in the business meant the pair rightly benefited from dividend payouts, but there were certainly some eyebrows raised when the company persevered with the planned payment of its 9c per share interim dividend on 19 March 2020 (a total of $11.2 million across the shareholder base) — right amidst the chaos of Australia’s international border closures. In fact at the same time as making that significant payout, the company was also making the first round of cuts to its staff numbers, including 275 redundancies and standing down an additional 1,300 staff, or 65% of its workforce. All remaining personnel were offered reduced working hours — and the Burnes’ agreed to take no salary at all for the rest of the financial year. That probably wasn’t too difficult for them to manage, given they had just paid themselves that dividend, meaning that for the financial year they each took home around $4.75 million — actually a small increase on the previous year.
Others at the top of the 2020 Million Dollar Club include Corporate Travel Management founder and CEO, Jamie Pherous. Pherous, who the previous year had successfully survived multiple attacks from hedge fund activists, had to deal with a 44% reduction in his income. However that still meant a $4.6 million dividend paid in the first half of the 2019/20 financial year, so he remains in second spot on the list this year, with a still extremely respectable income of just over $5.1 million. That was despite Corporate Travel Management’s board prudently deciding to defer the payment of its own interim dividend — planned for 14 April — which saved the company nearly $20 million in cash. And while he along with other executives at CTM have been managing on reduced salaries, that certainly hasn’t dampened their enthusiasm for the industry, with the company so well placed through the pandemic that it has made several canny acquisitions which are likely to have set it up for a strong post-pandemic future.
The fourth major travel agency business listed on the Australian Stock Exchange is Webjet, and it’s certainly been a roller coaster 12 months for its CEO John Guscic. Having set the business up for success through some major acquisitions which have made the company’s WebBeds B2B hotel wholesale operation the second biggest in the world, Guscic went along for the ride with the purchase of millions of shares in the company — financed with borrowings as he backed his own vision to see the Webjet share price and dividends increase. That all went well until the pandemic hit and the company’s value was literally decimated almost overnight, dropping from $17 down to just $1.70 per share. Although it’s not reflected in the 2019/20 figures — he held onto his stake until mid-September — the sale of more than 5 million shares on-market at a fraction of the price he had previously paid must have been a very bitter pill.
Nevertheless it’s a pill he swallowed with characteristic resolution, and just last month he told travelBulletin about his determination to continue to lead Webjet through the COVID chaos. The Webjet board clearly continues to back him, with the company’s recent Annual General Meeting voting in favour of a rejigged package for Guscic which puts him in the box seat to benefit from future share price upsides. For the 2020 financial year a dividend paid in the first six month period meant his $1.5 million base salary was roughly doubled, so he took home $2.9 million, down about 20% on the previous year.
Others in the top echelon of travel agency earners in 2020 included Flight Centre Travel Group chiefs Chris Galanty, CEO Corporate, who endured a 57% reduction in income to just over $1.5 million. The company’s Chief Financial Officer Adam Campbell saw his income plummet 85% to $1.34 million — similar to the 84% decline experienced by EGM The Americas, Dean Smith at just $498,000. And the company’s CEO Leisure, Melanie Waters-Ryan, also saw a 46% cut meaning she took home just over $1.25 million for the year.
Also on the list is former Helloworld Travel Group GM Retail & Commercial, John Constable, whose long-rumoured departure from the company only merited a brief mention in the fine print of the company’s Annual Report last month. As in previous years Constable’s package was significantly boosted by housing, motor vehicle and travel allowances relating to his initial relocation to Australia from the UK which bumped up his total package to $1.15 million, a decline of 16% on the previous year. Webjet Group Chief Commercial Officer Shelley Beasley, who recently also became a member of the AFTA Board, had a relatively stable year, taking home $774,000 which was actually a 2% increase on 2018/19, while Helloworld Group GM Corporate Nick Sutherland also survived well, with a 7% uptick in income to $571,000 for the year.
Changes in the cockpit
This year’s airline top earner list is significantly different to 2018/19, when Qantas CEO Alan Joyce was the undisputed captain with a total package worth $10.8 million. By contrast this year he only just scraped into the overall industry Million Dollar Club after taking home $2.1 million, which left him in third place in the airline rankings. In fact the top airline earner this year was former Air New Zealand CEO Christopher Luxon, who with exquisite timing exited the industry on 3 January 2020, taking home incentives and exit payments which lifted his package to NZ$3.9 million — meaning he earned more in just the first half of the year than any other Australasian aviation executive over the full 12 month period. Since then Luxon has managed to satisfy a long-held desire to move into politics, having been elected to the New Zealand Parliament last month as the National Party member for the Auckland electorate of Botany.
Although Air New Zealand doesn’t explicitly publish salary package details for its other key management personnel, as in previous years we’ve had a pretty good idea of who’s who among the airline’s top earners who are only broken out in salary brackets. It’s our guess that the second highest paid Air NZ executive, with a salary of about NZ$2.3 million, is former Chief Customer and Commercial Officer Cam Wallace, who is also no longer with the airline having last month been announced as the head of New Zealand radio conglomerate MediaWorks.
Regional Express Executive Chairman Lim Kim Hai was fifth on the airline top earners list this year, and as in previous periods took no salary whatsoever but instead lived on $1.98 million in dividends, down 33% on the 2018/19 year. That wasn’t enough to put him in the overall Million Dollar Club list for 2020. It was a similar story for several other former Qantas high flyers, including Jetstar Group CEO Gareth Evans who only took home about a third of his income this year, with a $1.3 million package compared to almost $4 million in 2019. The same can be said for former QF CEO International Tino La Spina and Andrew David, who is now chief of both domestic and international at Qantas, whose respective packages of $1.2 million and $1.1 million were down significantly on the previous year.
Unfortunately for industry voyeurs fascinated by the goings-on at Virgin Australia, the airline’s administrators have managed to obtain an exemption from the usual reporting requirements, meaning it’s not possible to have any insight at this stage into how much now departing CEO Paul Scurrah and other senior executives have taken home. Scurrah’s base salary of $1.3 million is likely to have been significantly boosted when the airline’s prospective new owners forced him out in favour of former Jetstar chief Jayne Hrdlicka, but unfortunately the opacity of the administration process hasn’t allowed us to peek behind the Virgin Australia curtain this year.
Familiar faces in hospitality
While not insignificant, the impact of COVID-19 on the top earners in Australia’s listed hotel, activity and experience businesses appeared to be less, with the list this year continuing to feature those at the top of Village Roadshow, Crown, Event Hospitality, Star Entertainment and Sealink Travel Group. At SeaLink there was a significant changing of the guard, with the company merging with Transit Systems and a new focus on bus services providing some very useful diversification for the business. SeaLink’s outgoing MD and CEO Jeff Ellison actually boosted his package by almost 30% to about $1.8 million — and that only reflected the six month period until he stepped down in early January. His replacement, Clint Feuerherdt, was also on the list with a $1.7 million package, again just for the subsequent half year, meaning he will be one to watch for 2021.
Village Roadshow Executive Chairman Robert Kirby is third on the 2020 Million Dollar Club list this year with a total income of $5.1 million, reflecting the payoff from his 78 million shares in the company. Crown Executive Director John Alexander, who stood down as the company’s Chairman in the lead-up to the current probity inquiry by the NSW Government, still managed to take home $3.7 million, while a number of other Crown chiefs also filled out the list including Ken Barton, Todd Nisbet and Barry Felsted. Over at rival Star Entertainment CEO Matt Bekier earnt $2.4 million, while Event Hospitality MD Jane Hastings was also in the list with a $2.4 million package.
This may be just the start
While it’s always intriguing to look at the disclosures in listed companies’ annual reports and marvel at the astronomic sums that some are taking home, it should also be noted that those at the top end are benefiting from dividends which have seen them take significant personal risks — both in founding businesses and then supporting them with their own capital. As they say “you have to risk it for the biscuit,” and the swings of previous years’ successes are certainly going to be balanced out by some significant roundabouts in 2021.
As many travel business owners are finding, with COVID-19 and Government policies continuing to wreak havoc, incomes are being decimated right across the industry. It’s incomprehensible to many in the community who remain in stable employment, but perhaps they should try to imagine living on just a fraction of what they took home the previous year — as many in our list this year are already experiencing. Unless a solution to COVID-19 is found and we learn to either cure, or live with, the virus, the significant reductions in this year’s Million Dollar Club are unfortunately just a foreshadowing of what is likely to be a complete bloodbath in 2021.