Virgin Australia CEO John Borghetti says China is the future for the airline and serving the mainland marks the first step of its global expansion program. (ROY LIU / CHINA DAILY)
If Qantas — Australia’s flag carrier — ever fears someone with the tenacity and the resolve to give it a run for its money, it may well be its ex-mailroom boy John Borghetti.
China is Australia’s biggest inbound tourism market and it’s still growing at double digits, a faster rate than any other global market
John Borghetti, CEO, Virgin Australia
Borghetti was still very much in his teens when Qantas took him on board more than four decades ago to help sort out its mail. He rose through the ranks to be executive general manager by the time he threw in the towel in 2010. It wasn’t his swan song though, but a watershed in his 44-year aviation career as he jumped ship to head up a fledgling carrier that was to become Australia’s second-largest airline.
Currently chief executive officer of Brisbane-based Virgin Australia Airlines, which took to the skies in 1999 with just two aircraft, Borghetti tells China Daily he’s still exhilarated about his job after all these years, with the Chinese mainland and Hong Kong feeding him with much of the stimulus to take up the challenges.
One of his primary goals now is to get Virgin Australia into the Chinese mainland market on the heels of the carrier’s inaugural flight to Hong Kong last month.
“To us, China is the future and it’s the first step of our global expansion. China is Australia’s biggest inbound tourism market and it’s still growing at double digits, a faster rate than any other global market. At the same time, the stronger business ties between China and Australia may see more frequent business visits, while the growing number of international students from China also means more family visits. So, it’s very important for us to tap the China market.”
According to Australia’s tourism department, the country hosted nearly 240,000 Hong Kong travelers last year, and raked in more than A$1.2 billion (US$944 million) in tourist spending. One in 12 of the 1.2 million Chinese mainland visitors who travelled to Australia went through Hong Kong last year. Hong Kong tourists ranked Australia as the most desirable destination to visit.
Despite the huge market, existing air services between Australia and Hong Kong have been disproportionate to demand, with only two carriers — Hong Kong’s Cathay Pacific Airways and Qantas — running the Melbourne to Hong Kong route.
Virgin Australia, which operated as a low-cost airline in its infancy, has piled pressure on the race as it scrambles for a slice of the region’s aviation pie, forcing both Cathay and Qantas to slash their Melbourne to Hong Kong fares by more than 30 percent shortly after Virgin Australia started flights to the SAR.
Virgin Australia now operates five weekly flights between Melbourne and Hong Kong, but Borghetti believes this is awfully inadequate. He projects a four-fold increase, but laments that upping the slots at Hong Kong International Airport is a challenging task.
Strength in alliances
Making itself a force to be reckoned with in the market, Virgin Australia has forged an alliance with three carriers under China’s biggest private airline operator HNA Group — Hong Kong Airlines, HK Express and HNA Aviation — to tap into their networks and distribution channels to help passengers reach more destinations on the Chinese mainland using transit services.
In support of the alliance, HNA Group acquired an almost 19-percent stake in Virgin Australia last year. In the next few years, Virgin will continue to take advantage of carriers owned by or affiliated to HNA, including Haikou-based Hainan Airlines, Tianjin Airlines and Kunming-based Lucky Air, to gain access to more mainland cities.
“Our next step is to have more direct flights between Australia and China, but we need to get more slots into Hong Kong from Sydney and Brisbane, as well as other mainland cities, We’re working on it now, and I hope we’ll be serving the mainland pretty soon,” says Borghetti.
Qantas — Virgin Australia’s arch rival — has been making its own calculations. It has gone into partnership with China Eastern Airlines and resumed flights from Sydney to Beijing — a service that was axed following the 2008 global financial crisis.
Although Virgin Australia reported a fifth consecutive annual loss at Virgin Australia on Thursday, its net loss has narrowed by 15 percent to A$220.3 million in the 2017 fiscal year ended June 30, reflecting some positive results from a restructuring program designed to cut costs and improve cash flow.
“We had a better performance for the last quarter of this financial year than the previous year. We finished the year with a higher cash balance, and a positive cash flow. We’ve been paying off debts and deleveraging the company. These are very good signs for moving into the future.”
Virgin Australia’s shares have lost about 17.4 percent so far this year, and are trading near record lows, valuing the company at A$1.57 billion. Qantas, which has posted record profits on a three-year turnaround plan, has seen its shares soar 72 percent to date.
Although its dwindling stock price has irked investors, Virgin Australia was ranked the “best airline with the best airline staff in Australia” according to the Skytrax World Top 100 list.
“We’re excited that people in China will soon be able to experience our world-class products and services when flying to Melbourne and beyond,” says Borghetti.
From the mailroom to the boardroom
John Borghetti draws immense inspiration from his nearly half a century’s association with the aviation business.
He got his first job as a junior mailroom boy at Australian flag carrier Qantas, working all the way up to executive general manager. He resigned in 2010 after being passed over as chief executive of Qantas, and joined key rival Virgin Australia Airlines as chief executive and managing director.
Under Borghetti’s leadership, Virgin Australia, for the first time, dethroned Qantas Airways as Australia’s best airline in the 2017 Skytrax World Airline Awards.
Borghetti’s virtual rags-to-riches story in the corporate scene has stirred curiosity among many over his phenomenal rise. But, the self-made high-flying executive puts it all down to diligence and concentration as the virtues needed for his career’s success.
“Work hard and stay focused. Too many young people today are in a hurry. They seek overnight success, but they’ve gone too fast and ended up nowhere. So, don’t think about an extra job, just worry about what you’re doing now.”
He also sees having a long-term vision, determination and the ability to win over people that will ultimately bring rewards.
“The short-term focus is for managers, and the longer-term focus is for leaders. If you have a long-term vision, being able to see where your business would be headed in 10 or five years’ time, your company will be around longer, compared with someone who merely looks at today or tomorrow.”
A leader, Borghetti says, should be determined and convinced in what he or she says, and avoid being put off by those laughing at what the leader says. Thus, a leader would not be disrupted by those bent on bringing him down, or force him to change his mind.
Borghetti recalls his rather unpleasant ordeal during his early days at Virgin Australia as he began a campaign to bring monumental changes to the Virgin product. Most people did not buy his idea and heaped scorn on it. But, he kept transforming the company’s simple, internet-based business offering cheap fares to a more complex system with different ticket pricings in different markets. As a result, the gap in the market share between the Qantas and Virgin brands has narrowed significantly.
Relationships within and outside the company are vital too, such as the relationship with suppliers, employees and customers.
“I always treat others like individuals and friends, rather than a business transaction. I don’t want to deal with a company based on the best prices it offers at the time, and then next year moves to another supplier because their prices are cheaper. We need to create a relationship that’s beneficial to both sides.”
As busy as he is, Borghetti spends most of his time on customers. He tries talking to 30 to 40 of them each day by email, telephone or in face-to-face encounters to understand their needs.
“The truth is the higher a person is in the leadership position, the more distant he’s from the customers, but that’s dangerous. So, I force myself to stay connected with my customers. I want to let them feel that when they have a problem, there’s someone who can help them. Only by talking directly to them, I can understand what they like and what they don’t like.”
Very important customers, he says, want to feel they are special, like being able to access senior management whenever they want, says Borghetti, citing a lesson from his family.
“My father used to own a coffee shop. When I was 14 and was helping him out at the shop, he would tell me: ‘Look after your customers, and the business will look after itself’. This has left a very deep impression on me. A leader must listen to customers — without them, you don’t have business.”