THE British entrepreneur Sir Richard Branson had one thing on his mind over lunch in Barcelona last July.
The founding chief executive of Virgin Blue, Brett Godfrey, had just announced he was quitting, and Sir Richard's lunch companion that day happened to be a key player in the Australian travel industry.
"He told me, 'his first name starts with J and his surname begins with B'," Sir Richard said yesterday of the man who was suggested to him in between tapas by Graham "Skroo" Turner to fill Mr Godfrey's shoes.
Four months before the non-compete clause in his Qantas contract ended, John Borghetti already had the imprimatur of Mr Turner, the founder and managing director of Flight Centre, who has for years helped to fill seats on Virgin Blue and Qantas aircraft.
But more importantly Sir Richard, whose Virgin Group is the largest shareholder in Virgin Blue, had the 36-year veteran of Qantas in his sights as the likely successor.
Yesterday Sir Richard, who was flying to his island in the Caribbean from Barcelona, said Mr Borghetti's "name just came up time and time again" during the seven-month search for a replacement.
"He comes with a lot of respect and he has set himself high targets. He is going to need two or three months to spend some time with the team ... [but] he is not going to make any rash decisions."
Mr Borghetti was not giving much away yesterday about his plans for the airline or - as is usual for an incoming chief executive - whether he was planning a management reshuffle. Nor was he wanting to voice his views on Qantas, after he was overlooked for the top job in 2008.
It was clear, however, that investors thought his appointment to the top job would present a big challenge to Qantas and its chief executive of 16 months, Alan Joyce.
But like his rival at Qantas, one thing Mr Borghetti is not banking on any time soon is a wave of consolidation in the airline industry.
"I have been hearing the word 'consolidation' for the past 36 years ... It hasn't happened anywhere near as much as even the smallest prediction. 'I think consolidation will happen in pockets ... but it is not going to be a big revolution."
Mr Turner said he did not expect a huge change of direction at Australia's second-largest airline.
"They have gone into international [routes] with great guns and obviously they have a lot of work to do there. The domestic market will be the cash cow for them," said Mr Turner, who has had business dealings with Mr Borghetti for more than 20 years.
Although Virgin Blue will step up its attempts to grab a bigger share of the corporate travel market, it is unlikely to want to retreat entirely from the budget end of the market. After all, to do so would merely give Qantas's offshoot, Jetstar, a chance to boost its market share.
And as fund managers pointed out yesterday, it is one thing to know how to grab a bigger share of the corporate travel market.
But it is an entirely different thing to replicate Qantas's frequency of flights, airport lounges and the frequent flyer rewards scheme which are needed to win a bigger slice of the corporate pie.
Frequently Asked Questions about this Article…
Who is John Borghetti and why does his appointment matter to Virgin Blue investors?
John Borghetti is a 36‑year veteran of Qantas who was widely named as the likely successor to Virgin Blue’s CEO. The article says he carries a lot of respect, was repeatedly suggested during a seven‑month search, and investors see his arrival as a significant competitive development that could challenge Qantas.
How was John Borghetti chosen for the top job at Virgin Blue?
According to the article, Sir Richard Branson heard Borghetti’s name repeatedly during a seven‑month search and the suggestion was reinforced over lunch in Barcelona by Graham “Skroo” Turner. Turner — founder of Flight Centre — had long supported Borghetti and helped bring him to Sir Richard’s attention.
What role did Graham Turner and Flight Centre play in the recruitment?
Graham “Skroo” Turner, founder and managing director of Flight Centre, repeatedly recommended Borghetti and had business dealings with him for more than 20 years. The article notes Turner has also helped fill seats on Virgin Blue and Qantas aircraft, giving him influence in the travel industry and the recruitment conversation.
Should investors expect immediate, dramatic changes at Virgin Blue under Borghetti?
The article reports that Sir Richard said Borghetti will need two or three months to spend time with the team and won’t make any rash decisions. Turner also said he did not expect a huge change of direction at Australia’s second‑largest airline, suggesting a measured transition rather than overnight upheaval.
Will Virgin Blue abandon the budget market to pursue corporate travel?
No. The article says Virgin Blue will step up attempts to grab a bigger share of the corporate travel market but is unlikely to retreat entirely from the budget end, because leaving that segment would give Qantas’s Jetstar an opportunity to boost market share.
What are the main challenges for Virgin Blue in winning corporate customers from Qantas?
Fund managers in the article point out that winning corporate travel customers is more than pricing — it requires replicating Qantas’s flight frequency, airport lounges and frequent‑flyer rewards scheme, all of which are hard to duplicate quickly.
Is industry consolidation likely to reshape the Australian airline market soon?
Borghetti is quoted as sceptical: he’s been hearing about consolidation for 36 years and expects only 'pockets' of consolidation rather than a major revolution. The article therefore suggests investors should not count on a wave of consolidation any time soon.
What does Borghetti’s appointment mean for Qantas and its CEO Alan Joyce?
The article notes that investors believed Borghetti’s appointment would present a big challenge to Qantas and its then‑CEO Alan Joyce, implying increased competition between the two carriers as Virgin Blue pushes into corporate travel and international routes.
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