Virgin Blue's first serve in battle for corporate travellers | Herald Sun
Virgin Blue boss John Borghetti eyes the business dollars. Picture: Jon Hargest Source: Herald Sun
Geoff Easdown From: Herald Sun November 29, 2010 12:00AM
Virgin Blue's chief executive is hell-bent on winning the high-yield suits that fly Qantas and he is telling would-be customers that Australia's second airline is about to go upmarket.
"And we're not going to have stroganoff in business class that happens to be the same as what is served in economy but on a bigger plate," he says taking a swipe at his former employer.
Virgin aims to grab about $200 million in business travel revenue from Qantas, giving it about 20 per cent of the corporate flyer market.
The move signals a marketing war of epic proportions. John Massimo Borghetti and Alan Joyce, his opposite number at Qantas, are keenly aware the suits market yields their biggest profits.
Mr Borghetti also knows Virgin Blue can no longer rely on mum and dad leisure travellers to stay profitable; that market is being squeezed by a rapidly growing Jetstar and Tiger Airways.
Both Mr Borghetti and Mr Joyce are well armed and will go into battle with markedly different strategies. Qantas has deeper pockets to fund any war of attrition and a high-level rewards program with attractive prizes for frequent travellers.
Mr Borghetti, on the other hand, is ideally suited to lead Virgin's attack strategy, having previously been the number three man at Qantas, where he rose from mail room boy to executive general manager.
Mr Borghetti is also a born salesman, evidenced at a Sydney lunch where everyone with a Virgin Velocity card was upgraded on the spot to gold standard.
"We have 10 per cent of the corporate market and we want to grow that to 20," he tells BusinessDaily.
"While it is a small increase it is big enough for us to be happy with," says Borghetti, explaining that he aims to diversify the carrier's income stream.
"At the moment we are too exposed at the leisure end, and like any good business, we need to hedge our revenue line.
"What I am doing is fast-tracking the evolution of an airline where the key aim is to double our share of available corporate traffic.
"I know we can do it, but in order to achieve what we want, some basic things need to be addressed, like creating an international network of airline alliances and enhancing our inflight and airport products."
Mr Borghetti, like all commanding generals, is not giving much away other than to infer the battle will be fought on several fronts - in domestic and international ticket sales and by seeking to undermine his rival's dominance as a sponsor of high-profile sport.
He is acquiring four 300-seat A330-200 jets to cash in on the mining boom, providing an airlink from the West Australian mines to the merchant banks that fund them in Sydney.
Virgin will also become the AFL's airline of choice. Next football season Virgin jets will carry 18 teams, 60 players, staff and officials, plus fans, across the nation. Insiders suggest the deal could generate as much as $8 million a year in revenue.
Those close to Mr Borghetti suggest he is chasing other sports, including the Australian Open Tennis championship and golf tournaments
He boasts having won the travel contract for the National Broadband Network and says other government traffic has also grown.
A suggestion that he is also about to swap the drab brown Virgin uniform for a bright new-look, draws the following response.
"You'll have to wait and see," he says, declaring that the roll-out of his change strategy should be completed by the end of next year.
Mr Borghetti's change plan is delicately hinged on winning approvals for new global alliances - a trans-Pacific tie-up with Delta Airways and a pairing with Air New Zealand across the Tasman.
On both Mr Borghetti has sought to appease the concerns of competition regulators who have yet to give their rulings.
Also on the agenda is a partnership with Middle East carrier Etihad, which he needs to recover the tens of millions his long-haul brand V Australia squandered on loss-making services.
Asked why people would fly V Australia when they could enjoy Etihad's world acclaimed service, Mr Borghetti replies: "Etihad wouldn't put our code on their aeroplanes if the product was not up to standard.
"And, we'll be offering them a one-stop service to dozens of destinations in Europe. If you go with Qantas, you only have Heathrow or Frankfurt."
Reminded that Mr Joyce publicly slammed V Australia's Etihad strategy, Mr Borghetti replies: "If we didn't think it was going to be profitable we wouldn't be doing it".