Wirraway
29th Sep 2003, 20:19
Just picked this article up on Sydney airport message board
on "Business Review Weekly" cover story from 2 weeks ago
in 2 parts because of length.
Wirraway
Part 1
Virgin Blues
The Dream Run falters as it prepares to float
By Stuart Washington and Nicholas Way
Business Review Weekly (BRW), September 18-24, 2003
Virgin Blue has had a dream run, but competition, heavy costs and a proposed float are creating turbulence.
Investors should be wary that Virgin Blue's big bets do not become its big blues. The successful low cost carrier is surrounded by strategic, operational and staffing challenges that threaten its profit growth as it moves towards a public listing. Threats to Virgin Blue include moves by Qantas and Air New Zealand to adopt Virgin Blue's successful value-based strategy; intense competition on the trans-Tasman route, where Virgin Blue is launching its first international service; disgruntled staff seeking to improve their position; upward pressure on costs from an ageing aircraft fleet; and the constant demand for cash created by the huge borrowings needed to finance a rapidly growing airline.
Virgin Blue is also facing increased scrutiny of behavior at odds with the smiling image portrayed by its cabin crew. Its hard-line stance against unions is attracting growing opposition, and its readiness to publicly lambast opponents in negotiations has won it some prominent enemies. Far from being easygoing, Virgin Blue is aggressive and litigious against any impediment to its goals. It took court action in a dispute with Sydney Airport about access to the old Ansett terminal. Its lawyers, Gilbert & Tobin, commissioned a Frontier Economics report that successfully argued against submissions to the Australian Competition & Consumer Commission (ACCC) by Qantas and Air New Zealand in their push for an alliance. The ACCC is still pursuing Qantas on a complaint brought by Virgin Blue related to capacity on the Adelaide-Brisbane route.
In keeping with the entrepreneurial flair cultivated by co-owner Sir Richard Branson, Virgin Blue has taken big bets before. In August 2000 Virgin Blue was down to a razor-thin $1 million in cash before its launch the following month. Virgin Blue's chief executive, Brett Godfrey, says the company "bet the shop" after Ansett collapsed in September 2001, aggressively expanding, lifting business 6o% in four months.
Virgin Blue's history of big bets has paid off so far the carrier has expanded rapidly to take 28% share of the domestic market. Arguments still remain about whether this success is based on Ansett's collapse in September 2001, which left a 40% "capacity hole" in the domestic market, or due largely to the Virgin Blue strategy. A Macquarie Bank analyst, Ian Myles, says: "Stepping into the market share that Ansett has vacated, that's a fantastic scenario for anyone."
Virgin Blue was also given an enormous financial free kick by the Beattie Labor Government, which some Queensland unions estimate could have cost taxpayers as much as $6o million. Unions rarely use a Productivity Commission report to support an argument, but a submission by the Queensland Council of Unions (QCU) to this year's state budget process quoted the commission in support of its case against government subsidies to business. The submission quoted: "Gains from providing selective assistance at the state level are largely an illusion. Only in a few cases, with particular characteristics, is there likely to be a net gain for the state." The case of Virgin Blue, which prompted comment by the Queensland auditor-general on commercial-in-confidence arrangements, was uppermost on the QCU's mind in its submission.
Godfrey and his big shareholders, Chris Corrigan and Richard Branson, are rolling the dice again in a series of big gambles, including taking the airline to an initial public offering (IPO). Godfrey predicts annual revenue growth of 15-2o% after a pre-tax profit of $158 million in the year to March 31, 2003. He says there are three potential periods for an IPO: November-December or, more likely, March or May next year. Goldman Sachs and Credit Suisse First Boston have been advising Virgin Blue, but no lead broker has been appointed.
But cracks are already starting to appear in the float proposal. Godfrey says the airline may not float if a third airline enters the Australian market. And Virgin Blue, which has based its cost savings on simplicity and a single-model fleet, is now having to launch the separately liveried Pacific Blue for its trans-Tasman services because it cannot use the Virgin brand name outside Australia.
Another problem for the float could come from Branson himself. The airline has been forced to respond to Bransoris "announcements" that commit the airline to as-yet-unapproved programs (such as frequent-flyer points) and market share goals (of 5o%). During a float, when there are rules against inaccurately promoting an investment, "loose cannon comments can be damaging.
The characters in the Virgin Blue story do not stop with Branson, who is attracting derision in aviation industry internet chatrooms because of Virgin Blue's staffing problems. Godfrey is the determined entrepreneur and one-time auditor who brought the airline into being after gaining a $50,000 cheque from Branson to conduct a feasibility study. Corrigan is the one-time waterfront warrior credited with breaking the strength of the Maritime Union of Australia. His Patrick Corporation bought in to the airline for $260 million in March 2002, and recently agreed to pay another $240 million for the right to hold its stake at 45%. Corrigan brought his light touch to negotiations about Virgin Blue's use of the old Ansett terminal in Sydney last year when he accused Sydney Airports Corporation of an "act of #######ry". Branson announced that the issue had been resolved last November, and appeared at the press conference smoking a peace pipe and wearing a native American head-dress.
The latest addition to Virgin Blue's colorful cast is Peter Dowling, a Brisbane company director and socialite, appointed only last month as an independent director of two new Virgin Blue subsidiaries, VBNCi and VBNC2, which will handle repayments on total loans of about $US400 million for 10 new planes.
Competition came to Virgin Blue's front door when the low-cost Air New Zealand subsidiary Freedom Air started a trans-Tasman service to Brisbane. In another sign of increasing competition, Qantas has replaced 27 of its 112 trans-Tasman flights with its New Zealand-based low-cost carrier JetConnect. Into this intensely competitive trans-Tasman route, Virgin Blue is launching its first international service, flying to Wellington and Christchurch.
Delayed flights
But there have been hiccups, and the service is unlikely to fly in October as originally planned. Plans to fly to Fiji and Vanuatu in October also may be delayed. And big talk last year about flying to Singapore, Malaysia, Brunei and 18 other possible international destinations seem to be on hold, as there are no notifications to the International Air Services Commission for additional international services.
Despite this uncertainty, Virgin Blue plans to go one step further and launch a domestic service in New Zealand. This market threatens to be a quagmire for the combatants. In submissions to the ACCC, Qantas and Air New Zealand painted a bleak future if their proposed alliance did not go ahead. Qantas said it would introduce three additional Boeing 737s to the New Zealand domestic market, increasing its capacity by 60%. Air New Zealand said it would have no choice but to respond to this competitive threat in its home market and also increase capacity. Air New Zealand's chief executive, Ralph Norris, said on August 18 that his airline would lose the battle of attrition with Qantas within three to six years.
On September 9 the ACCC rejected a proposed Qantas-Air New Zealand alliance on the ground that it would be highly anti-competitive. But the submissions to the ACCC remain the clearest indication from Qantas and Air New Zealand about their likely behavior if there is no appeal to the ACCC ruling.
Godfrey denies his airline will be fighting on too many fronts."History has shown we have been pretty competitive," he says. He also denies his airline is at risk from its New Zealand ambitions. "For us, to begin with, it's going to be a two-plane operation, which represents just on 3% of our business. It's not going to be significant ever. We have got the ability to cherry pick and skirt around the edges."
But a greater risk for Virgin Blue is in the changed competitive conditions within Australia. This challenge is not just from the low-cost domestic carrier proposed by Qantas chief executive Geoff Dixon (the subject of a feasibility study due by November). Nor is the challenge solely from the much-conjectured arrival of Singapore Airlines in the Australian market.
On September 5 Godfrey acknowledged the potential for additional rivals inside Australia when he said in an e-mail to staff. "The Australian Government has recently proposed legislation to allow `mutual recognition', which in a nutshell means that Air New Zealand, JetConnect or Freedom Air could at any time choose to fly their lower cost NZ-based operations between any two Australian domestic ports." In short: domestic low-cost rivals on Virgin Blue's Australian routes.
It is a scenario supported by the ACCC, which said when it rejected the Qantas-Air New Zealand alliance: "The creation and expansion of JetConnect, the Qantas subsidiary operating in domestic New Zealand, may well have been motivated as much by the creation of a low-cost operation for deployment on other parts of [the] Qantas network."
=============================================
Part 2
The challenges facing Virgin Blue are also demonstrated by the size of its commitments. It is a far cry from its past as a start-up with two planes. BRW has seen documents that suggest Virgin Blue has recently finalised loans worth a total of about $US4oo million for the purchase of 10 Boeing 737s (announced last December). The first quarterly repayments are due soon. The purchase was completed only in the middle of August. The deal involved loan commitments of $US331 million from the United States Government's Export-Import Bank as well as loans from other banks.
The move to buy the 10 planes, on top of the 30 now on lease, highlights Virgin Blue's growing need for cash. The agreement by Corrigan that allows Virgin Blue's float to get going - with the potential to raise about $400 million in fresh equity for the business - comes within a month of the signing of the loan documents.
Godfrey says raising cash is his key goal for the float and the basis of a management submission to the board. "It's always smarter in this game to have more money in the bank than less money in the bank."
The ownership of the planes also raises issues about maintenance costs. An industry observer who requested anonymity highlighted the extent to which progressively greater maintenance bills could affect Virgin Blue's cost structure. He says that with a young fleet of planes, costs in the early years could be minimal before rising to an industry average of about 15% of total costs. This would bring maintenance costs closer to those of Qantas.
It is a point underlined by Smith Barney analyst Jason Smith. "Within five years I think we will find convergence of costs is pretty close," he says. "Qantas's cost base is coming down, Virgin Blue's is going up." The Australian Licensed Aircraft Engineers Association (ALAEA), many of whose members are responsible for giving the green light for every airline flight, agrees. The ALAEA says Virgin Blue will have two options: turn over their aircraft leases, potentially at a higher cost, or pay more for maintenance as the fleet ages. Godfrey dismisses these claims, saying Virgin Blue has locked in new leases on favorable terms and that maintenance costs are built into the long-term cost structure.
Godfrey seems more concerned that the ALAEA might get a foothold in Virgin Blue's operations. While stressing he is not anti-union ("we don't have any issues with unions") he clearly does have an issue with the ALAEA. "We just say we're not going to be dictated to by a union [the ALAEA] that is holding Qantas to ransom. Look what happened to Ansett. Unionism and poor management contributed to the downfall of an icon. While my team is on watch, we're not going to let that happen."
It is not just the ALAEA. The Australian Services Union (ASU), the dominant airline union, is also in effect locked out. Virgin Blue has struck a deal with the Transport Workers Union (TWU) to cover ground staff, and with the Australian Federation of Air Pilots and the Flight Attendants Association to cover pilots and cabin crew. Unions might be in, but Virgin Blue is picking which ones.
The thrust of Godfrey's approach to human resources is that the airline's inclusive, relaxed, casual, almost family-like culture removes the need for unions. If Virgin Blue had not been given financial assistance by Queensland's Labor Government, making a union presence a political necessity, management would have considered individual contracts an attractive option.
Certainly Godfrey seems convinced Virgin Blue is a paradise for employees. But some employees disagree. Unions say staff turnover is starting to rise. Julie Bignell, secretary of the ASU's clerical and administrative branch (central and southern Queensland), says the union receives many complaints from Virgin Blue employees, on issues such as sexual harassment, an authoritarian management that believes its public-relations spin about inclusiveness but in practice does not consult the workforce, a lack of training, and wages and conditions. An ACTU industrial officer, Richard Watts, says wages for most Virgin Blue staff are lower than for their Qantas counterparts.
Former and present employees say that many staff no longer believe management talk about "one big happy family". One says: "Staff are encouraged to be open if they have something positive to says anything negative is crushed severely." Another says there is a huge difference between the image and the reality. "That's the same as many companies, but why promote yourself as something different, as something special, when you aren't? It's just hypocrisy." It was not just management that came under fire; the same people were just as critical of the TWU, which was considered "a tame-cat union'.
The organiser, Peter Paulos, denies any suggestion that the union does not represent its members' interests "vigorously". He says wages and conditions are on a par with those at Qantas.
The problem this presents for Virgin Blue is that pressure will mount on the TWU and other unions to take a tougher stance as the airline becomes more established. These union officials are sick and tired of Qantas's Dixon portraying Virgin Blue workers as "Third World workers". Certainly a listed company with a mooted $2-billion market capitalisation will find it harder to present itself as a battling, entrepreneurial minnow against the Qantas behemoth.
Although Godfrey rejects any suggestion of serious staff discontent, even he concedes that rapid growth has created a situation where some middle managers have struggled to handle bigger staff numbers and the human resources issues that entails. At the very least it means more training, more structured human resources systems, more bureaucracy - in short, higher costs as the airline grows.
Virgin Blue has had a dream run: Ansett's collapse, Queensland Government largesse, intense and mostly favorable media coverage and, it must be said, a slick, entrepreneurial operation that does not carry the costly historical baggage of Qantas. But airlines demand systems, and the bigger the airline, the more certain the systems need to be. Investors must be convinced Virgin Blue can develop those systems while remaining faithful to its low-cost, entrepreneurial past.
===========================================
on "Business Review Weekly" cover story from 2 weeks ago
in 2 parts because of length.
Wirraway
Part 1
Virgin Blues
The Dream Run falters as it prepares to float
By Stuart Washington and Nicholas Way
Business Review Weekly (BRW), September 18-24, 2003
Virgin Blue has had a dream run, but competition, heavy costs and a proposed float are creating turbulence.
Investors should be wary that Virgin Blue's big bets do not become its big blues. The successful low cost carrier is surrounded by strategic, operational and staffing challenges that threaten its profit growth as it moves towards a public listing. Threats to Virgin Blue include moves by Qantas and Air New Zealand to adopt Virgin Blue's successful value-based strategy; intense competition on the trans-Tasman route, where Virgin Blue is launching its first international service; disgruntled staff seeking to improve their position; upward pressure on costs from an ageing aircraft fleet; and the constant demand for cash created by the huge borrowings needed to finance a rapidly growing airline.
Virgin Blue is also facing increased scrutiny of behavior at odds with the smiling image portrayed by its cabin crew. Its hard-line stance against unions is attracting growing opposition, and its readiness to publicly lambast opponents in negotiations has won it some prominent enemies. Far from being easygoing, Virgin Blue is aggressive and litigious against any impediment to its goals. It took court action in a dispute with Sydney Airport about access to the old Ansett terminal. Its lawyers, Gilbert & Tobin, commissioned a Frontier Economics report that successfully argued against submissions to the Australian Competition & Consumer Commission (ACCC) by Qantas and Air New Zealand in their push for an alliance. The ACCC is still pursuing Qantas on a complaint brought by Virgin Blue related to capacity on the Adelaide-Brisbane route.
In keeping with the entrepreneurial flair cultivated by co-owner Sir Richard Branson, Virgin Blue has taken big bets before. In August 2000 Virgin Blue was down to a razor-thin $1 million in cash before its launch the following month. Virgin Blue's chief executive, Brett Godfrey, says the company "bet the shop" after Ansett collapsed in September 2001, aggressively expanding, lifting business 6o% in four months.
Virgin Blue's history of big bets has paid off so far the carrier has expanded rapidly to take 28% share of the domestic market. Arguments still remain about whether this success is based on Ansett's collapse in September 2001, which left a 40% "capacity hole" in the domestic market, or due largely to the Virgin Blue strategy. A Macquarie Bank analyst, Ian Myles, says: "Stepping into the market share that Ansett has vacated, that's a fantastic scenario for anyone."
Virgin Blue was also given an enormous financial free kick by the Beattie Labor Government, which some Queensland unions estimate could have cost taxpayers as much as $6o million. Unions rarely use a Productivity Commission report to support an argument, but a submission by the Queensland Council of Unions (QCU) to this year's state budget process quoted the commission in support of its case against government subsidies to business. The submission quoted: "Gains from providing selective assistance at the state level are largely an illusion. Only in a few cases, with particular characteristics, is there likely to be a net gain for the state." The case of Virgin Blue, which prompted comment by the Queensland auditor-general on commercial-in-confidence arrangements, was uppermost on the QCU's mind in its submission.
Godfrey and his big shareholders, Chris Corrigan and Richard Branson, are rolling the dice again in a series of big gambles, including taking the airline to an initial public offering (IPO). Godfrey predicts annual revenue growth of 15-2o% after a pre-tax profit of $158 million in the year to March 31, 2003. He says there are three potential periods for an IPO: November-December or, more likely, March or May next year. Goldman Sachs and Credit Suisse First Boston have been advising Virgin Blue, but no lead broker has been appointed.
But cracks are already starting to appear in the float proposal. Godfrey says the airline may not float if a third airline enters the Australian market. And Virgin Blue, which has based its cost savings on simplicity and a single-model fleet, is now having to launch the separately liveried Pacific Blue for its trans-Tasman services because it cannot use the Virgin brand name outside Australia.
Another problem for the float could come from Branson himself. The airline has been forced to respond to Bransoris "announcements" that commit the airline to as-yet-unapproved programs (such as frequent-flyer points) and market share goals (of 5o%). During a float, when there are rules against inaccurately promoting an investment, "loose cannon comments can be damaging.
The characters in the Virgin Blue story do not stop with Branson, who is attracting derision in aviation industry internet chatrooms because of Virgin Blue's staffing problems. Godfrey is the determined entrepreneur and one-time auditor who brought the airline into being after gaining a $50,000 cheque from Branson to conduct a feasibility study. Corrigan is the one-time waterfront warrior credited with breaking the strength of the Maritime Union of Australia. His Patrick Corporation bought in to the airline for $260 million in March 2002, and recently agreed to pay another $240 million for the right to hold its stake at 45%. Corrigan brought his light touch to negotiations about Virgin Blue's use of the old Ansett terminal in Sydney last year when he accused Sydney Airports Corporation of an "act of #######ry". Branson announced that the issue had been resolved last November, and appeared at the press conference smoking a peace pipe and wearing a native American head-dress.
The latest addition to Virgin Blue's colorful cast is Peter Dowling, a Brisbane company director and socialite, appointed only last month as an independent director of two new Virgin Blue subsidiaries, VBNCi and VBNC2, which will handle repayments on total loans of about $US400 million for 10 new planes.
Competition came to Virgin Blue's front door when the low-cost Air New Zealand subsidiary Freedom Air started a trans-Tasman service to Brisbane. In another sign of increasing competition, Qantas has replaced 27 of its 112 trans-Tasman flights with its New Zealand-based low-cost carrier JetConnect. Into this intensely competitive trans-Tasman route, Virgin Blue is launching its first international service, flying to Wellington and Christchurch.
Delayed flights
But there have been hiccups, and the service is unlikely to fly in October as originally planned. Plans to fly to Fiji and Vanuatu in October also may be delayed. And big talk last year about flying to Singapore, Malaysia, Brunei and 18 other possible international destinations seem to be on hold, as there are no notifications to the International Air Services Commission for additional international services.
Despite this uncertainty, Virgin Blue plans to go one step further and launch a domestic service in New Zealand. This market threatens to be a quagmire for the combatants. In submissions to the ACCC, Qantas and Air New Zealand painted a bleak future if their proposed alliance did not go ahead. Qantas said it would introduce three additional Boeing 737s to the New Zealand domestic market, increasing its capacity by 60%. Air New Zealand said it would have no choice but to respond to this competitive threat in its home market and also increase capacity. Air New Zealand's chief executive, Ralph Norris, said on August 18 that his airline would lose the battle of attrition with Qantas within three to six years.
On September 9 the ACCC rejected a proposed Qantas-Air New Zealand alliance on the ground that it would be highly anti-competitive. But the submissions to the ACCC remain the clearest indication from Qantas and Air New Zealand about their likely behavior if there is no appeal to the ACCC ruling.
Godfrey denies his airline will be fighting on too many fronts."History has shown we have been pretty competitive," he says. He also denies his airline is at risk from its New Zealand ambitions. "For us, to begin with, it's going to be a two-plane operation, which represents just on 3% of our business. It's not going to be significant ever. We have got the ability to cherry pick and skirt around the edges."
But a greater risk for Virgin Blue is in the changed competitive conditions within Australia. This challenge is not just from the low-cost domestic carrier proposed by Qantas chief executive Geoff Dixon (the subject of a feasibility study due by November). Nor is the challenge solely from the much-conjectured arrival of Singapore Airlines in the Australian market.
On September 5 Godfrey acknowledged the potential for additional rivals inside Australia when he said in an e-mail to staff. "The Australian Government has recently proposed legislation to allow `mutual recognition', which in a nutshell means that Air New Zealand, JetConnect or Freedom Air could at any time choose to fly their lower cost NZ-based operations between any two Australian domestic ports." In short: domestic low-cost rivals on Virgin Blue's Australian routes.
It is a scenario supported by the ACCC, which said when it rejected the Qantas-Air New Zealand alliance: "The creation and expansion of JetConnect, the Qantas subsidiary operating in domestic New Zealand, may well have been motivated as much by the creation of a low-cost operation for deployment on other parts of [the] Qantas network."
=============================================
Part 2
The challenges facing Virgin Blue are also demonstrated by the size of its commitments. It is a far cry from its past as a start-up with two planes. BRW has seen documents that suggest Virgin Blue has recently finalised loans worth a total of about $US4oo million for the purchase of 10 Boeing 737s (announced last December). The first quarterly repayments are due soon. The purchase was completed only in the middle of August. The deal involved loan commitments of $US331 million from the United States Government's Export-Import Bank as well as loans from other banks.
The move to buy the 10 planes, on top of the 30 now on lease, highlights Virgin Blue's growing need for cash. The agreement by Corrigan that allows Virgin Blue's float to get going - with the potential to raise about $400 million in fresh equity for the business - comes within a month of the signing of the loan documents.
Godfrey says raising cash is his key goal for the float and the basis of a management submission to the board. "It's always smarter in this game to have more money in the bank than less money in the bank."
The ownership of the planes also raises issues about maintenance costs. An industry observer who requested anonymity highlighted the extent to which progressively greater maintenance bills could affect Virgin Blue's cost structure. He says that with a young fleet of planes, costs in the early years could be minimal before rising to an industry average of about 15% of total costs. This would bring maintenance costs closer to those of Qantas.
It is a point underlined by Smith Barney analyst Jason Smith. "Within five years I think we will find convergence of costs is pretty close," he says. "Qantas's cost base is coming down, Virgin Blue's is going up." The Australian Licensed Aircraft Engineers Association (ALAEA), many of whose members are responsible for giving the green light for every airline flight, agrees. The ALAEA says Virgin Blue will have two options: turn over their aircraft leases, potentially at a higher cost, or pay more for maintenance as the fleet ages. Godfrey dismisses these claims, saying Virgin Blue has locked in new leases on favorable terms and that maintenance costs are built into the long-term cost structure.
Godfrey seems more concerned that the ALAEA might get a foothold in Virgin Blue's operations. While stressing he is not anti-union ("we don't have any issues with unions") he clearly does have an issue with the ALAEA. "We just say we're not going to be dictated to by a union [the ALAEA] that is holding Qantas to ransom. Look what happened to Ansett. Unionism and poor management contributed to the downfall of an icon. While my team is on watch, we're not going to let that happen."
It is not just the ALAEA. The Australian Services Union (ASU), the dominant airline union, is also in effect locked out. Virgin Blue has struck a deal with the Transport Workers Union (TWU) to cover ground staff, and with the Australian Federation of Air Pilots and the Flight Attendants Association to cover pilots and cabin crew. Unions might be in, but Virgin Blue is picking which ones.
The thrust of Godfrey's approach to human resources is that the airline's inclusive, relaxed, casual, almost family-like culture removes the need for unions. If Virgin Blue had not been given financial assistance by Queensland's Labor Government, making a union presence a political necessity, management would have considered individual contracts an attractive option.
Certainly Godfrey seems convinced Virgin Blue is a paradise for employees. But some employees disagree. Unions say staff turnover is starting to rise. Julie Bignell, secretary of the ASU's clerical and administrative branch (central and southern Queensland), says the union receives many complaints from Virgin Blue employees, on issues such as sexual harassment, an authoritarian management that believes its public-relations spin about inclusiveness but in practice does not consult the workforce, a lack of training, and wages and conditions. An ACTU industrial officer, Richard Watts, says wages for most Virgin Blue staff are lower than for their Qantas counterparts.
Former and present employees say that many staff no longer believe management talk about "one big happy family". One says: "Staff are encouraged to be open if they have something positive to says anything negative is crushed severely." Another says there is a huge difference between the image and the reality. "That's the same as many companies, but why promote yourself as something different, as something special, when you aren't? It's just hypocrisy." It was not just management that came under fire; the same people were just as critical of the TWU, which was considered "a tame-cat union'.
The organiser, Peter Paulos, denies any suggestion that the union does not represent its members' interests "vigorously". He says wages and conditions are on a par with those at Qantas.
The problem this presents for Virgin Blue is that pressure will mount on the TWU and other unions to take a tougher stance as the airline becomes more established. These union officials are sick and tired of Qantas's Dixon portraying Virgin Blue workers as "Third World workers". Certainly a listed company with a mooted $2-billion market capitalisation will find it harder to present itself as a battling, entrepreneurial minnow against the Qantas behemoth.
Although Godfrey rejects any suggestion of serious staff discontent, even he concedes that rapid growth has created a situation where some middle managers have struggled to handle bigger staff numbers and the human resources issues that entails. At the very least it means more training, more structured human resources systems, more bureaucracy - in short, higher costs as the airline grows.
Virgin Blue has had a dream run: Ansett's collapse, Queensland Government largesse, intense and mostly favorable media coverage and, it must be said, a slick, entrepreneurial operation that does not carry the costly historical baggage of Qantas. But airlines demand systems, and the bigger the airline, the more certain the systems need to be. Investors must be convinced Virgin Blue can develop those systems while remaining faithful to its low-cost, entrepreneurial past.
===========================================