Buffeted, Godfrey Fastens His Seatbelt (AFR)
Thurs "Australian Financial Review"
Buffeted, Godfrey Fastens His Seatbelt
Date January 20th, 2005
There's speculation about the tie-less CEO's future, writes Tansy Harcourt
When Brett Godfrey sketched plans on a beer coaster for a low-cost carrier back in the early 1990s, he predicted getting it off the ground would be the toughest task.
"I thought the hardest part of the airline would be setting it up because we would work 24/7," Virgin Blue's chief executive Godfrey told The Australian Financial Review recently.
Ten years later he would discover how wrong he was. Yesterday, Virgin delivered its second profit warning in five months, saying earnings in the year to March 31, 2005, would fall 10 to 15 per cent short of those delivered in 2004.
The stockmarket response was savage. Virgin Blue shares were slammed down 12.6 per cent.
In sharp contrast to its hitch-free start-up years, 2004-05 has been tough for Virgin Blue and its usually outspoken founder and chief executive. The pressure is on Godfrey to show impatient investors that the business model works especially in the face of the onslaught from Qantas and its low-cost scion, Jetstar.
Reflecting the pressure on Godfrey is the airline's decision to hire two senior transport executives to strengthen its management team, triggering speculation about Godfrey's future.
Godfrey made a commitment during the float process to stay on for three years but has said he is not bound beyond that point. His right-hand man, head of strategy David Huttner, decided to leave just a few months ago.
In response to speculation about his future, Godfrey will only say that every company should have a succession plan in place.
Virgin Blue chairman Chris Corrigan has previously said he stands by Godfrey, but he has also confirmed that the decision to hire an Air New Zealand executive and former Nike executive reflected the fact that the airline's management skills could be enhanced.
"I have total confidence in Brett Godfrey," he said at the time.
Virgin Blue flew into turbulence in 2004 when oil prices soared and a reinvigorated Qantas launched Jetstar. The promotional $29 fares offered by Jetstar were matched by Virgin Blue and this, coupled with its 60 per cent increase in capacity, decimated its financial statistics for the first few months.
"I have learnt that it's very much more difficult running a public company than it is a private company because everything is so bloody public," Godfrey says.
Now, the man who prides himself as being a "hands-on" manager has realised that getting the right message to shareholders can be just as important in the short term as the day-to-day running of the business.
"I have three obligations: No. 1 is staff, then sales, then shareholders that's always been my maxim. But now shareholders is trying to compete with No. 1 and No. 2 in terms of my time."
The message was loud and clear when Virgin Blue's share price plummeted to a record low last year.
What Godfrey failed to get across to investors then was that he was comfortable with the airline's position and that the woes Virgin Blue experienced during Jetstar's start-up were largely planned for.
By the time of its half-year results in November, the airline had clambered back to just a 2 per cent decline on the previous year.
Godfrey describes the experience as a lesson and as a result has stepped back from his "Godfrey-isms". Instead of a showing financial analysts slides of "more red jets" in answer to questions on strategy as occurred at the full-year results Godfrey is leaning towards numbers and charts.
"I know some people thought we were too laissez-faire, coming out there and saying, 'What's the strategy? More red jets'. All right, we picked that certain people think that's naff and we've toned it down," he says.
Also coming in much smaller doses are Godfrey's usual serves to rivals, governments and airports.
"I probably have toned it down in terms of bashing people, but I still had a big dig at the government. I'm not afraid to do that we are a challenger brand," he says.
Godfrey gave a much more refined, charts-and-numbers presentation when announcing the airline's half-year earnings.
"I just didn't feel my normal passionate self," he says. "Maybe that's a good thing, maybe I go slower when I'm knackered . . . I felt I was probably boring people to death. "
But don't mistake that for a deliberate move to replace a freewheeling style with a corporate clone. "Qantas has the corporate stuff all sewn up, so we are not going to try do that I think our style is about people having a go.
"I'm not going to wear a tie, I'm not going to get up there and wear a suit. I don't feel I have to impress everyone," he says.
It's been a rocky ride for Virgin Blue in its first year as a listed company, but after falling from grace the pressure is on Godfrey to prove that the airline's business model is sustainable after all, his job depends upon it.
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