Slow take-off for top job

Virgin Australia yet to short-list for CEO’s successor

UNDER chief executive John Borghetti, Virgin Australia transformed from a budget airline into a serious rival to Qantas with the backing of strategic investors including Singapore Airlines and China’s HNA Group.

The support, however, came at a price: a shareholder register dominated by airline partners with competing interests and a sometimes fractured board.

Mr Borghetti (pictured), only the second CEO since the company began operations in 2000, has announced plans to depart, leaving open one of the toughest jobs in aviation.

His successor faces major challenges as the airline looks to build on recent improvements in its balance sheet and domestic business and turn around its international and low-cost divisions.

Chairman Elizabeth Bryan said Virgin Australia had yet to short-list CEO candidates, meaning an appointment could take some time.

“We are looking for a CEO that can take on the strategy we have got in place and continue to push it towards profitability and who will generally work to support the positive momentum that we have got going,” she said.

Virgin last week forecast it would be profitable in the current half after posting a $109.6 million annual operating profit, the best in a decade. Its statutory loss after tax of $653.3 million, however, was a record due to impairments and restructuring charges.

In the domestic market, which accounts for two-thirds of Virgin’s revenue, a stable duopoly has emerged with Qantas. Both airlines have cut capacity, resulting in higher fares and record domestic profits, with the exception of Virgin’s struggling low-cost arm, Tigerair.

The international market, loss-making for Virgin, presents a bigger challenge.

The airline is adding flights in the competitive Hong Kong market and a long-running joint venture with Air New Zealand covering flights between Australia and New Zealand ends next month. The pair then switch from partners to rivals.

Virgin chief financial officer Geoff Smith said the domestic business was the “golden egg” and it would use the smaller international division, which also flies to Los Angeles in partnership with Delta, for inbound traffic to funnel passengers to the domestic service.

“I think probably there is more for this than for international to be profitable,” he said.

“Yes, absolutely it has to improve and it will improve with the maturity of the Hong Kong market as but one example.”