The mail that came 44 years late

Vir­gin Aus­tralia is mak­ing it­self a force to be reck­oned with in the re­gion’s avi­a­tion race. CEO John Borghetti tells Lin Wen­jie that China’s air travel boom has turned into a bo­nanza for them.

China Daily (Hong Kong) - - BUSINESS - ROY LIU / CHINA DAILY Con­tact the writer at cher­rylin@chi­nadai­

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.

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 ($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, H NA G r o u p a c q u i r e d a n 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 Haik­oubased 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 work- ing on it now, and I hope we’ ll be serv­ing the main­land pretty soon,” says Borghetti.

Bet­ter per­for­mance

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 ser vice 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.

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