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.
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.
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
CAPITAL IDEAS: PETER LIANG
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.