Is Qantas Airways Limited’s (ASX:QAN) CEO Pay Justified?

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Alan Joyce became the CEO of Qantas Airways Limited (ASX:QAN) in 2008. This report will, first, examine the CEO compensation levels in comparison to CEO compensation at companies of similar size. Then we’ll look at a snap shot of the business growth. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Qantas Airways

How Does Alan Joyce’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Qantas Airways Limited has a market cap of AU$8.4b, and is paying total annual CEO compensation of AU$7.7m. (This is based on the year to June 2018). While this analysis focuses on total compensation, it’s worth noting the salary is lower, valued at AU$2.1m. We looked at a group of companies with market capitalizations from AU$5.8b to AU$17b, and the median CEO total compensation was AU$4.1m.

Thus we can conclude that Alan Joyce receives more in total compensation than the median of a group of companies in the same market, and of similar size to Qantas Airways Limited. However, this doesn’t necessarily mean the pay is too high. We can better assess whether the pay is overly generous by looking into the underlying business performance.

The graphic below shows how CEO compensation at Qantas Airways has changed from year to year.

ASX:QAN CEO Compensation, May 28th 2019
ASX:QAN CEO Compensation, May 28th 2019

Is Qantas Airways Limited Growing?

Qantas Airways Limited has increased its earnings per share (EPS) by an average of 4.6% a year, over the last three years (using a line of best fit). It achieved revenue growth of 6.0% over the last year.

I would argue that the improvement in revenue isn’t particularly impressive, but it is good to see modest EPS growth. So there are some positives here, but not enough to earn high praise. You might want to check this free visual report on analyst forecasts for future earnings.

Has Qantas Airways Limited Been A Good Investment?

Most shareholders would probably be pleased with Qantas Airways Limited for providing a total return of 98% over three years. This strong performance might mean some shareholders don’t mind if the CEO were to be paid more than is normal for a company of its size.

In Summary…

We compared total CEO remuneration at Qantas Airways Limited with the amount paid at companies with a similar market capitalization. As discussed above, we discovered that the company pays more than the median of that group.

One might like to have seen stronger growth, but shareholder returns have been pleasing, over the last three years. As a result of the juicy return to investors, the CEO remuneration may well be quite reasonable. CEO compensation is one thing, but it is also interesting to check if the CEO is buying or selling Qantas Airways (free visualization of insider trades).

If you want to buy a stock that is better than Qantas Airways, this free list of high return, low debt companies is a great place to look.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.