Ross Greenwood speaks to Virgin Australia (ASX:VAH) Chief Executive, John Borghetti, after he annoucned he will not renew his contract when it expires January 1 2020. They discuss Borghetti’s 45 years in the aviaton indsutry, starting out as a boy in the mail room to becoming the CEO.
Introduction: The amazing career of Virgin CEO John Borghetti
Ross Greenwood: News out today that one of Australia’s leading transport executives- in fact, he’s been around the place for many decades, has decided that as of next year, in fact, it’ll be the 1st of January 2020 that he will hang up his boots. I’m not sure what you quite hang up when you’re an airline executive like John Borghetti. John Borghetti is the chief executive of Virgin Australia. Now prior to that he’d been really one of the key executives at Qantas. Looked after all of their marketing, all of their client liaison, all that sort of stuff.
Ran all the commercial side of Qantas. When he left Qantas he was basically at that stage- overlooked you could argue, as the chief executive of that airline. He left, became the chief executive of its major competitor. This is a significant landscape. Now, bear in mind, even if you go to Virgin Australia right now, running 130 aircraft in operation, running thousands and thousands of staff, running oil prices, running consumer demand.
These are very high-pressure jobs. When you got executives that stay in these for a long time it is really some sort of an accomplishment. He’s on the line right now. John, many thanks for your time.
Interview with: John Borghetti, CEO, Virgin Australia
John Borghetti: Yes. Hi, Ross. Good to talk to you.
Ross Greenwood: Why did you give more than 18 months notice in regards to your standing down?
John Borghetti: Look, I think it’s the right thing to do. You want the board to know your intentions early and give them plenty of time to make sure that they have all the time they need to pick a search firm, do a global search. You don’t want those things rushed. I think it’s the right thing to do.
Ross Greenwood: Okay. In May 2011 you started what’s called the Game Change program. Now, this is really some of the moves in Australia’s domestic aviation business and that was the fight for capacity. It was on, then it was off. It was really about trying to cement down international shareholders and partners. You’ve subsequently seen one of those, Air New Zealand do a coach year agreement in the past couple of weeks with Qantas. It’s an ever-changing landscape, that’s the one thing that really strikes me.
John Borghetti: Absolutely, that’s what aviation is about. I’ve been in it 45 years. There’s never two years that are the same. There’s things that come at you from around corners and that’s what so exciting about it. People think that it’s the allure of the airplanes, actually for me it’s not. It’s the allure of the excitement and the diversity that happens in a business.
When you think about it, an airline is a dozen-odd businesses all rolled up into one. You’ve got a logistics business, you’ve got a marketing business, you’ve got a customer service business, and so on and so on. It’s actually a very exciting industry.
Ross Greenwood: In that regard, you have to be highly competitive? It is no doubt one of the most competitive businesses in Australia. Notwithstanding the fact that you’ve got two key players in the space, but every day you’re scratching out market share, you’re scratching out prices, you’re trying to do the metrics to make certain you haven’t got too many seats flying in the air empty. All of these succumbs in. It’s almost like a giant chess game, isn’t it?
John Borghetti: Yes, it is, and it’s a very complex fun. As I said, that’s why I enjoy it and I’m sure that’s why my team enjoy it. When I look at what they’ve done over the last eight years in turning a low-cost carrier into- actually a group of businesses now because we’ve got, what? Three Airlines in Virgin, Tiger, VARA which is our charter business. We’ve got a velocity program.
Velocity had about, I think it was just under two million members when I started. It’s now over nine million and it just keeps growing. It’s very exciting and in the process, we did what Australia needed, which was provide competition and competition is important in every industry as you know. In the process of doing that we also created jobs. I think overall the team have done an amazing job for Australia.
Ross Greenwood: Okay. You’re renowned however for being something of a perfectionist. I know this. This is about your attention to detail when it comes to your hobbies, including cars or these types of things. Tell me about another thing. When you’re at night time- and I know you don’t sleep an awful lot, but when you’re sitting there looking at the ceiling at night time, what do you worry about?
John Borghetti: It’s easy to say I worry about fuel prices, or hedging, or currency, or demand but that’s normal. A lot of businesses have those challenges and certainly, airlines do. I really think that the biggest worry that I’ve got, in fact, I remember saying this at a board meeting once is, the thing that keeps me awake is keeping the engagement of staff. That’s what this is about. This is a service business.
It just happens to be an airline. If your staff are unengaged and if your staff are not motivated, if your staff are not doing the best they can for the people that pay good money to access your service, then I think that’s the biggest threat you’ve got. To be fair I do believe that is our key differentiator. Our people are a differentiator. We say that. A lot of businesses say that but I’m very proud of what they’ve done and and and what they continue to do.
Ross Greenwood: Going forward though the dynamics of airlines are going to continue to change. As you look forward over the next 10 years, and that’s what your successor will arguably have to deal with, what are the key challenges for that person?
John Borghetti: I’ve got to be a bit controversial in this. If you look, let’s say beyond 2030, I really genuinely believe that air transport will be about speed and not about distance. Whilst today’s aircraft are about doing non stops from here to there for 18 hours or whatever it might be, I think customers will be surprised at how quickly supersonic travel is going to hit the market, and I really do think that in the 30s you’ll see it, if not sooner.
I think it’s going to be about, as I said speed, getting from point A to point B faster rather than– Even if it meant stopping a couple of times rather than non-stop I really genuinely believe that.
Ross Greenwood: That means having good connections and having good alliances internationally. This seems to be the way in which even domestic airlines are going to survive into the future.
John Borghetti: Absolutely. Look, in the airline world now alliances are everything. We’re very fortunate, we’ve got a number of airlines on a register. In fact, I don’t know of any other airline in the world that’s got the caliber of airlines that have invested in us and for that, I’m very grateful. They are terrific partners- as an alliance partner let alone as a shareholder. Yes, it’s absolutely right.
Ross Greenwood: Do you believe- here in Australia one other thing that continues to be thrown up the whole time is high-speed rail, that Australia needs high-speed rail. Open up the regions, tackle the fact that you’ve got some of the highest volumes of traffic on international air routes between our major capital cities. Is that the real thing in our lifetime?
John Borghetti: I think it is. Again, I’ll be a bit controversial but I think sooner or later it will come, and it needs to come. When you think about it logically and just step back, you say to yourself, “Actually, flying from Sydney to Canberra just doesn’t make sense.” You should be able to do it in an hour, an hour and a half or whatever it is in a train but obviously, population, base economics, all those things come into play.
One thing we do know is that technology keeps getting cheaper. I think the day will come when that will happen. reach between Sydney or Canberra or somewhere else, I don’t know but you can’t fight it back forever.
Ross Greenwood: I could say if you could go back now in time, quite a long time, and you could go and have a quiet chat to a migrant boy who was arriving at the age of seven with his family with just two cases, two suitcases at an airport, what would you say to that young lad?
John Borghetti: Look, I’d just say work hard, keep your head down, and don’t worry about your next job. Just do the current one well, and that’s really what it’s about. I think really too often we’re too worried about what’s coming up next instead of focusing on working, just rolling your sleeves up and getting on with what you’re doing.
Ross Greenwood: It’s a great story. Do you remember that day arriving at the airport as a family?
John Borghetti: I remember it vividly. I remember I was petrified coming in because- I shouldn’t admit this, but I’d read about kangaroos in Australia and I thought these were man-eating things, animals, and I thought here’s a little boy seven years old, I’m landing and we landed a airport. In those days, of course, 1961-62 sorry, it was just pasture it was just- there was hardly any houses around and I was just petrified one of these kangaroos would come out from one of the bushes [laughs]. Yes, I remember it vividly.
Ross Greenwood: It’s amazing, it really is. It’s a wonderful story, and a wonderful story of Australian success as well. John Borghetti, chief executive of Virgin Australia will be around for the next 18 months or so. We will talk to him again before then, but I got to say I was a great supporter of the program and John, I appreciate your time this evening.
John Borghetti: Thanks Ross, always good to talk to you. Take care.
[00:09:09] [END OF AUDIO]
Image source: 2GB