Borghetti to build on success

Qantas examined the concept in 2005 but decided against it since the aircraft would have been a new model in its fleet and under its conservative rules the 777-200LR struggled under some scenarios.

V Australia, however, is a 777-300ER operator, has six options to exercise and could take delivery of a -200LR next year.

One analyst told Contrails that the ultra-long-range concept would be a “perfect fit” for Borghetti and Virgin Blue. “Nonstops are what business traffic wants and Qantas will not be able to match V Australia. It will give them a clear point of difference going forward,” the Sydney-based analyst said.

Virgin Group Chairman Richard Branson, who is Blue’s largest shareholder, has told Contrails that he has “serious interest” in operating nonstop between LHR and Perth and that the service almost certainly would be a joint V Australia/Virgin Atlantic Airways flight.
At Qantas, Borghetti developed one of the world’s best domestic economy products and it is expected that he will reshape Blue’s domestic offering with an upgraded and dedicated premium economy aimed at the corporate market as the airline strives to capture more high-yield traffic.

According to Centre for Asia Pacific Aviation Chairman Peter Harbison, “Yield management is an art and [Borghetti] is an artist. Borghetti is a positive for Virgin Blue.”

Another part of the Borghetti brief will be to take Godfrey’s domestic plans to upgrade the airline’s product and deliver.

In February Godfrey told Contrails that the airline will start taking delivery of 50 737NGs next year and the aircraft will feature three economy cabins – premium economy, economy and economy lite, with the latter featuring less legroom to compete with budget carriers Tiger and Jetstar.

In a move to target corporate travellers Virgin Blue will introduce a dedicated cabin for premium economy with cabin dividers.
The commitment for the 737s and the upgrade come on the back of the Virgin Blue Airlines Group, solid net profit of $62.5 million for the fiscal first half ended December. 31, 2009 reversed from a $101.4 million loss in the year-ago period.

“ Yield management is an art and he is an artist. Borghetti is a positive for Virgin Blue.”

The result was remarkable considering Qantas’ net profit of just $58 million down 72 per cent from the $210 million earned in the year-ago semester. In fact Qantas would have made a loss but for the contribution of low-cost subsidiary Jetstar Airways, which trebled its earnings, and the frequent-flyer program that doubled earnings.

The Qantas mainline unit posted EBIT of $60 million, down 63.33 per cent year-over-year, while Jetstar recorded a thumping 181 per cent lift in EBIT to $121 million. Of course Jetstar was also boosted by the transfer of Qantas’ New Zealand operations in July 2009. The loyalty program reported EBIT of $157 million.

Godfrey was naturally delighted with the result as many suggested that he was bailing out of Virgin just when things were getting tough. “Yeah sure its great to go out on a high and there were some negative comments last year when I announced my retirement.”

Particularly pleasing for Godfrey was the 4.5 per cent decrease in CASK excluding fuel through cost-saving initiatives and enhanced productivity across the network.

“Any way you cut it, to continue to achieve cost reductions while we continue to grow our business and position it to rapidly and fully exploit any improvement in economic conditions demonstrates the resilience of our model,” he told Contrails.

However there was still plenty of caution with Godfrey warning that the operating environment is “still uncertain” and concerns remain around the pace of the global economic recovery.

But while there may be a degree of uncertainty going forward Virgin Blue’s numbers were all positive. Half-year revenue rose 12 per cent to $1.51 billion and yield improved 11.4 per cent to 11.72 cents.

However it was the short-haul operation that led the way with a pre-tax profit of $108 million, up 126 per cent year-over-year, while V Australia delivered a pre-tax loss of $39 million, reflecting the difficult long-haul environment and start-up costs.

Going forward, Godfrey said V Australia will be profitable later this year in line with original guidance and the group is looking to a full fiscal year profit between be $80 and $110 million.

There is little doubt that Borghetti brings definition to Virgin Blue’s future and there is also little doubt that Godfrey has handed his successor a great springboard to launch the next era in the airline’s “brilliant career.”