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Virgin ground for Borghetti

written by australianaviation.com.au | March 2, 2010
New VB CEO John Borghetti. (Virgin Blue)
New VB CEO John Borghetti. (Virgin Blue)

As a former employee of another part of the Qantas Group, I only met John Borghetti once at an employee roadshow in 2007 talking about some of the future plans of the group. But from what I saw of him, I think he’ll make a great CEO at Virgin Blue, both personally and professionally.

The roadshow itself was entertaining, and Borghetti was a good host, but it was during the question time that he showed a willingness to really engage with staff. When a mechanic bluntly raised concerns about 737 maintenance, Borghetti gave a short answer to the question, but also made a point of following up with the AME afterwards. I didn’t catch what they were talking about, but it was a moment that, under other senior executives, would have been lost.

It’s that kind of thing which I think will make Borghetti fit in well with the Virgin Blue culture. Sure, he may not have demonstrated the zaniness that his predecessor Brett Godfrey and his major shareholder Sir Richard Branson have, but Virgin itself is moving away from this, at least on the front lines, as it chases the tasty yields of the business travel market.

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But it will be in the management office, no doubt with a strong team around him, where Borghetti should prove his worth. Nobody outside of the Qantas Group understands how it works as well as he does, which will be a great advantage as the airline plans to stroll boldly past the Dixon line in the sand of domestic marketshare.

It’s important to remember the circumstances under which Borghetti had taken the lead role at Qantas Airlines. This was a time when Jetstar was starting out, and there is no doubt that at the level of CEO Geoff Dixon that there was competition between the two flying entities for the resources of the company. If some indications are correct, Dixon actually used this to his advantage by effectively pitting Borghetti against then Jetstar CEO Alan Joyce. While the growth of Jetstar has obviously been the Qantas Group’s priority, Borghetti was still able to make the best of the strong economic conditions of the time, positioning Qantas clearly as the business-oriented carrier within the group. That experience will no doubt be invaluable to the new world carrier.

As such, the Virgin Blue board has sent the signal that it no longer wants to be seen as the ‘cheap and cheery’ brand that it once was, content to simply grow markets. Instead, we could expect that the airline will continue its push into the business market, which will be aided greatly if it wins a greater slice of the government market as a result of the tender process announced last year.

Borghetti’s experience running the international side of Qantas should also bode well for the expanding V Australia operation. With Qantas still exposed to soft international yields, look for V Australia to continue its expansion, particularly on routes where Jetstar is unlikely to enter.

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What will be interesting to watch is the battle between Joyce and Borghetti. While they probably get along well (there were often friendly bets over football matches, as well as jokes about the Mafia), expect to see some fierce competition in product offerings between the two carriers as they battle for the growing SME market, as well as competition on key international routes.

It’s hard to know what lies ahead for Borghetti. At the media conference announcing his appointment, he declined to answer questions about the future of Virgin Blue or what he saw as the main strategic challenges. But there are some major plans being left by Godfrey, and when Borghetti takes the helm in May, we can expect to see some interesting moves.

Possibly the biggest move will be on the fleet front. While the carrier has confirmed that it has an in principle arrangement with Boeing for a further 50 737s, indications from Godfrey last year are that the carrier has cast its net wide and could bring in a number of other aircraft, such as turboprops, more E-Jets and maybe even some other widebodies to supplement the 777-300ERs on regional international routes (and no doubt some domestic services at peak times). With a fair chunk of change in the bank and improving fortunes, a new order on top of the 737 one could well be on the way.

There’s no doubt that Borghetti will also place a big emphasis on the product offered by Virgin Blue, including possibly taking the step to add a dedicated business class/premium economy cabin. However, in doing so he will have to ensure that such upgrades do not add major cost burdens to the carrier, lest it lose its competitive advantage – its lower cost base.

Overall, it seems that the appointment of Borghetti will help to redefine Virgin Blue and ultimately the airline landscape in Australia and wider Asia Pacific region. Watch this space!

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