Qantas' Governance Reforms: Balancing Record Profits with Long-Term Shareholder Value in a Scrutinized Sector

In 2025, Qantas finds itself at a crossroads. The airline has reported record profits, driven by post-pandemic travel demand and strategic cost-cutting. Yet, beneath the surface, governance and reputation risks loom large, threatening to undermine long-term shareholder value. This article examines how Qantas' recent governance reforms—spurred by a 2024 McKinsey & Co review—aim to reconcile short-term financial success with the enduring challenges of stakeholder trust, cultural accountability, and non-financial risk management in a sector under intense public and regulatory scrutiny.

The Governance Wake-Up Call: From Reputational Crisis to Strategic Overhaul

Qantas' governance review, conducted by Tom Saar of McKinsey & Co, exposed systemic weaknesses that contributed to a loss of stakeholder trust. Key findings included a board that deferred excessively to a dominant CEO, a lack of rigorous debate on non-financial risks (such as customer satisfaction and operational reliability), and an adversarial approach to stakeholder engagement. These issues were compounded by public relations missteps, including mishandled flight cancellations and executive remuneration decisions during the pandemic.

The review's 32 recommendations have since been implemented, with notable changes including:
- Board Composition and Oversight: Two new independent non-executive directors were appointed, and the board expanded its remuneration committee to a “people and remuneration committee,” emphasizing culture and stakeholder relations.
- Executive Incentives: Customer metrics in the group scorecard were increased from 20% to 30%, and a “reputation measure” was added to long-term incentive plans.
- Risk Management: Non-financial risks, including operational reliability and cultural issues, are now prioritized, with clear escalation protocols.

These reforms signal a shift from a financially focused board to one that balances financial, operational, and reputational priorities. However, the question remains: Can these changes sustain long-term value creation in an industry where public sentiment can swiftly turn against even the most profitable companies?

Short-Term Gains vs. Long-Term Resilience: A Delicate Balance

Qantas' record profits in 2025—bolstered by a rebound in international travel and aggressive cost management—highlight the airline's short-term financial strength. Yet, investors must scrutinize whether these gains are built on sustainable foundations. For instance, the airline's decision to reduce FY23 short-term incentives for its former CEO by 33% and tie executive pay to customer satisfaction and reputation metrics reflects a commitment to aligning leadership with long-term stakeholder interests.

However, challenges persist. The aviation sector is inherently volatile, with risks ranging from fuel price fluctuations to regulatory shifts (e.g., mandatory climate reporting by 2027). Qantas' governance reforms must now prove their mettle in navigating these uncertainties. For example, while the board has committed to a net-zero emissions target by 2050, its medium-term climate goals remain partially aligned with the 1.5°C trajectory. This gap could attract activist investor attention, particularly as industry super funds like Aware Super increasingly prioritize climate accountability.

Reputation as a Strategic Asset: The Cost of Erosion

Reputation risk is a critical, often underestimated factor in shareholder value. Qantas' governance review revealed that the board's previous “command and control” leadership style and reactive stakeholder engagement exacerbated reputational damage during the pandemic. In response, the airline has adopted a more open and empathetic communication strategy, including direct board exposure to customer feedback and enhanced transparency in stakeholder reporting.

This shift is crucial. A 2025 survey by the Australian Institute of Company Directors found that 72% of investors view corporate culture and stakeholder trust as “critical” to long-term value. Qantas' efforts to rebuild trust—such as revising its customer credit management policies and improving employee engagement—align with this sentiment. Yet, the airline must continue to demonstrate that these changes are not merely reactive but embedded in its governance DNA.

Investment Implications: Navigating the Governance-Value Nexus

For investors, Qantas presents a compelling case study in the interplay between governance and value creation. While the airline's short-term financials are robust, the true test lies in its ability to sustain these gains through resilient governance practices. Key considerations include:
1. Board Accountability: The transition to John Mullen as chairman and the inclusion of diverse board members (e.g., Dion Weisler and Doug Parker) signal a commitment to fresh perspectives and expertise.
2. Non-Financial Metrics: The integration of customer and reputation measures into executive incentives is a positive step, but investors should monitor how these metrics evolve and whether they translate into tangible improvements in service quality.
3. Climate and Regulatory Risks: Qantas' climate strategy, while ambitious, must align with tightening regulations and investor expectations. Failure to do so could trigger divestment pressures or regulatory penalties.

Conclusion: A Model for Governance in a High-Stakes Sector

Qantas' governance reforms offer a blueprint for how companies in high-risk, public-facing sectors can balance short-term gains with long-term resilience. By addressing cultural, reputational, and non-financial risks head-on, the airline is positioning itself to weather future crises and maintain stakeholder trust. For investors, the lesson is clear: Governance is not a cost but a strategic investment. In Qantas' case, the jury is still out on whether these reforms will fully protect its long-term value, but the steps taken thus far suggest a company determined to learn from its past and fly toward a more sustainable future.

As the aviation sector evolves, Qantas' ability to harmonize profitability with governance excellence will be a defining factor in its success. For now, the airline's record profits are a testament to its operational agility—but it is the strength of its governance that will determine how long those profits endure.