Virgin ready for a 'gunfight'
Mon "The Australian"
Virgin ready for a 'gunfight'
By Steve Creedy
April 12, 2004
BY the end of last year, Virgin Blue chief executive Brett Godfrey was in dire need of a holiday. Godfrey was feeling the strain after a hectic year – even by Virgin's frenetic standards – and the fatigue was starting to show.
Late nights and early mornings as the airline grew rapidly, working towards December's float, had taken their toll.
Family life had suffered as Godfrey shepherded the airline he refers to as "a third child" to a successful public listing.
"I was close to burnout last year," he says. "I got to a point where we had two shareholders who were trying to decide what to do with the company, we had renegotiated three EBAs (enterprise bargaining agreements), we were trying to launch an international airline and we grew 30 per cent in three months. (With) all those things, you couldn't sit at home and stop thinking about it."
Godfrey still has the occasional sleepless night but a month's holiday in his wife's native Canada has left the Virgin boss revitalised and ready to rumble with low-cost competitor Jetstar.
Sitting in Virgin's Blue Room at Brisbane Airport, Godfrey is relaxed, candid and enthusiastic about the year ahead.
If he is rattled by this month's arrival of Jetstar, it doesn't show as he cheerfully observes how he's looking forward to a fight with the Qantas offshoot that could knock millions off his new-found wealth.
To the contrary, he says, "That's starting to excite me.
"I've got a fight on my hands and I've got to convince our people we're going into another gunfight and we've got to be on our toes. We've got to be sharper and smarter."
Godfrey has come further than he ever dreamed that night in 1993 in the Copthorne Hotel in the London suburb of Crawley when he and Virgin Blue chief operating officer Rob Sherrard sketched out their idea for the low-cost carrier on the back of a beer coaster.
Last December's successful float of Virgin Blue means Godfrey has a paper worth of about $85 million but he is in no hurry to take the money and run.
Instead, and with caveats about family and health, he has promised the airline another three years and has voluntarily locked up his stock.
Godfrey dismisses last year's big windfall as "business as usual", noting he also sold shares when Patrick Corp bought in its 50 per cent stake in the airline.
Asked whether success and wealth have changed him, he says that's for others to judge but he does not believe so.
"I'm living in the same house, driving the same car and my kids are going to the same school," he says.
In fact, he sees a $US285,500 ($373,870) options payment during his Virgin Express days – his first – as far more significant.
"That meant more to me than anything because at that stage the credit card was maxed, I didn't own my house and I was spending more than I earned," he says.
"That was enough to pay off the mortgage and pay off my credit cards and still have a little bit of money. That was the life-changing event."
Besides, he says, setting up Virgin Blue "has always been more about achieving something than becoming wealthy".
"I did it because this to me was a great opportunity, a great challenge and was going to be a lot of fun," he says. "And I do still get out of bed in the morning for a challenge, not a dollar, and I think that's the reason why I continue now."
Godfrey's obsession with his creation is highlighted by the fact he still "chucks bags" and cleans toilets to get a first-hand view of operations.
He jokes that staff refer to him not as a micro-manager but as a "micro-meddler".
"I've always said this is a third child to me and ... I take everything that happens to it very personally," he says.
Despite some worries among analysts about the future competitive effect of Jetstar, rising fuel costs and a weakening dollar, Virgin ended its March financial year on a roll.
By its own estimates, the airline is on track to record a net profit after tax of more than $150 million for the year, up from $108 million last year, on revenues of more than $1.3 billion.
Analysts are tipping it will top $160 million. It has captured more than 30 per cent of the market and is flying a fleet of 41 aircraft with more due on by the the end of next month.
Godfrey continues to predict good times ahead for Virgin Blue and promises it will remain relevant to a wide range of Australian travellers, including the corporate market.
He is expecting a good response to Virgin's international Pacific Blue brand and says he is already working on "a very interesting product initiative that I think will take passengers away from Qantas".
Godfrey says Virgin will repulse Jetstar by remaining relevant to the market and is strongly of the view the new airline poses a bigger threat to Qantas's mainline services.
"They've tried different models and this is interesting but I still think Jetstar is a big bang approach for them," he says. "I think it's either going to win for them or hurt them materially."
Godfrey also believes the arrival of Jetstar will drive efficiency at Virgin Blue and expects the opposition will have a few tricks up its sleeve.
Godfrey faced a steep learn ing curve in starting up Virgin Blue and he now admits there were several occasions in which the concept could have been stillborn.
A University of Victoria graduate, who cut his teeth as an accountant with Touche Ross in Australia and Canada, Godfrey left Australia in 1991 to find work in the aviation industry.
A string of rejections from other airlines would see him find a berth at Virgin Group in 1993 where he would spend three years as Virgin Atlantic's finance manger before moving to Brussels-based cut-price carrier Virgin Express.
It was after honing his skills attempting to cope with the inherited problems of the ill-fated Virgin Express, first as chief financial officer and then as acting chief executive, that Godfrey finally won acceptance for the airline after personally pitching it to Richard Branson in 1999.
Branson asked to see Godfrey's business plan and, by the end of the day, they were batting ideas around.
"Over the weekend we negotiated what my contribution would be and what I'd get for myself and executives that I'd put in as a team," Godfrey says. "So it was all done pretty quickly – it had to be, because we announced in November 1999 down at Customs House."
However, the November 30 announcement at Sydney's Circular Quay almost didn't happen.
As Godfrey landed in Australia in preparation for the big day, he switched on his phone to receive a message to call Branson's office urgently about a change in plans.
He rang to be told his new airline was to be canned because Virgin Atlantic was in sensitive negotiations with Singapore Airlines.
The Singaporeans, at that stage hoping to invest in Ansett, had concerns about a cut-price carrier entering the Australian market.
Godfrey rang Sherrard, who turned up with a slab of beer and the two pondered on their next move.
The airline boss had half a dozen beers in quick succession "because the adrenalin was pumping" and rang Branson.
"I've never spoken to him like it since or before but I gave him a bit of a serve," he says. "I half expected him to say, 'All right, you've had your say, now you're fired'.
"But he didn't. He said he was actually on the verge of calling me back anyway.
"And he said, 'Look, I thought about this and I thought that if I'd listened to all the doubters in my life I would never have started Virgin Atlantic'."
Two days later, Branson and Godfrey were sitting under the glare of media lights at Circular Quay announcing a new era in Australian aviation.
But never in his wildest imaginings could Godfrey predict the startling chain of events that would so quickly catapult Virgin, from its maiden flight on August 31, 2001, into major carrier status.
He knew Ansett was the weak link and believed Virgin Blue would supplant it as the second carrier within five years but not that the Melbourne-based carrier would collapse.
The September 2001 decision to place Ansett in administration placed immense pressure on Virgin and Qantas but opened up an opportunity for the smaller airline to accelerate its growth plans and grab some of Ansett's 46 per cent market share.
Godfrey believes Virgin also benefited from the arrival of Patrick and the addition of a non-airline perspective from Chris Corrigan.
Yet the growth has not been without its problems and, at one stage, led to the airline's maintenance systems coming under increased scrutiny by authorities. More recently, problems with a maintenance record system have seen the airline unable to bring in additional planes and surrendering its twin engine operations status.
Nonetheless, Godfrey believes the problem is licked and Virgin is on track to add five more aircraft by the end of May.
He says he is not slowing down but he is not being as miserly these days with resources and he is trying to find a better balance between work and family.
He has also put in place succession plans for most of the senior executives, including himself.
In the long term he accepts that one day his fledgling airline will fly without him.
"I've got some other ideas I'd like to play around with (that) I can't devote any time to right now," he says.
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