Borghetti's machete causing problems in Virgin Blue - eTB Industry Insider Commentary and Opinion - etravelblackboard.com
Borghetti's machete causing problems in Virgin Blue
Tuesday, 3 August 2010
Price of survival is high
The good old travel industry grapevine is awash with rumours that John Borghetti's machete waving and chopping in the Virgin Blue Group is having a pretty damaging effect on company morale, with even the Brisbane Courier Mail reporting this week that all is not happy at Virgin HQ, a traditionally very upbeat and happy workplace.
Let's face it though and be fair to Borghetti, that it was inevitable his appointment was bound to cause waves or even tsunamis within the company, as would the appointment of any new CEO to any company, with senior execs in DJ being given the push, including head of
pr Heather Jeffrey, which one DJ insider described to me as - she and Borghetti having an uncomfortable history at Qantas and there was no way she was going to survive.
At the end of the day, Borghetti is the CEO and he appears to have the confidence of the Board and Shareholders to get the struggling airline back on track and do what needs to be done to grow its business, eradicating the losses announced earlier this year.
The Courier Mail report also says that one employee described the mood as "quite unsettling", with some work teams "decimated" by retrenchments and that particularly at risk are those with V Australia, the group's loss-making overseas offshoot launched last year, adding, "We're all a little taken aback".
Well I have to say - "smell the coffee" - because no business can continue haemorrhaging like DJ was and changes had to be made - even if they were tough ones, with over at V Australia, Scott Swift having the chop and COO Andrew David planning to leave by the end of the year, with more heads anticipated to role as V Australian is absorbed into the Virgin Group, along with other what were "standalone" businesses.
With the challenge for Borghetti and his new team largely brought in from Qantas, being how DJ can increase its share of the business market while holding on to its leisure market, the next few months will be very telling indeed, with the more deep reaching effect of his reorganisation to be announced shortly, including what are believed to be route withdrawals and cutting and a refocussing on more profitable routes and rationalisation of the brands and their associated overheads into one business.
With the company's full year results about to be announced, we need to remember that pre his departure, former CEO Brett Godfrey announced that Virgin's bottom line result improved by $164 million, from a $101.4 million loss in the December half of 2008 to $62.5 million profit for the six months to December 31 - then less than three weeks after taking over Borghetti shocked everyone by announcing that that company's pre-tax profit would plummet by up to 75% down to $20 million to $40 million, with analysts now expecting an even worse result to be announced.
Let's wait and see, but let's also give credit where its due to Borghetti for taking on the task of turning around Australia's second largest airline, because if he fails the price is very high for everyone, not just in the company and in travel and tourism generally, but the impact the collapse of the company would even have on the Australian economy.