Game On!

A Conversation with John Borghetti, Chief Executive Officer, Virgin Australia

It is a beautiful day in Sydney, Australia, as we enjoy a breathtaking view of Harbour Bridge through the big glass windows that surround the office of Virgin Australia CEO John Borghetti, or as the industry has lovingly nickname him, “JB.” Everything around us — Virgin Australia aircraft models and models of classic cars — shows a man of passion whose energy and vision, coupled with more than 40 years of industry experience, transformed Virgin Australia in record time. During our meeting, Borghetti is telling me about the “Game Change” and “Game On” programs that have changed the Australian aviation landscape.

Going back to where it all began, in August 2000, Sir Richard Branson’s Virgin name entered Australia’s aviation market with then low-cost Virgin Blue Airlines, bringing real competition to the leisure market. The airline started with one route, two aircraft and a team of only 200 people. The following year, it introduced 14 new routes, and within 10 months of its first flight, it welcomed its 1-millionth guest.

For the next several years, the airline reached numerous milestones. It launched Pacific Blue, a New Zealand-based leisure-focused international airline. It introduced a loyalty program. It became the first Australian airline to offer remote check-in via mobile devices, called “Check-Mate.” And it was awarded Best Low-Cost Airline (Australia/Pacific) four times by Skytrax.

Customer Experience At The Forefront

Customer experience is at the heart of Virgin Australia’s Game Change transformation. As such, the airline was the first in the Asia-Pacific region to offer a new wireless in-flight entertainment system, enabling customers to stream TV shows, movies and music to their own mobile devices.

Fast forward to 2011 when the Virgin Blue name was changed to Virgin Australia and the airline was reborn under the leadership of Borghetti. It was more than a name change and new brand. It was part of the Game Change Program (a new business strategy that would change nearly every aspect of the company) Borghetti introduced as part of a strategy to reposition the carrier in the market to become Australia’s airline of choice. As such, the airline was transformed from a low-cost carrier to a traditional full-service airline.

As part of its new business model and brand identity, the airline introduced Luke Mangan-inspired menu options and new uniforms designed by Juli Grbac. It opened several premium lounges. It also introduced premium valet at the Sydney and Brisbane Airports and business-class across its domestic network, as well as reinvented its frequent flyer program, Velocity, which was named best frequent flyer program for Australian business travelers in the 2011 and 2012 AusBT Awards and pulled down three Freddie Awards last year for Program of the Year, Best Redemption Ability and Best Elite Program.

In addition to these awards and as a result of its many enhancements under its new brand, since 2011, the airline has received more than 25 industry awards including:

  • Skytrax 2014 Best Airline Staff Service Award (fourth consecutive year),
  • Australia’s Domestic Business Airline of the Year for 2013 at the Roy Morgan Customer Satisfaction Awards,
  • Outstanding Customer Service at the 2013 Customer Service Institute of Australia (CSIA) Awards,
  • Best Airline for Children by Out & About with Kids during the 2013 Best of Family Travel Readers Choice Awards,
  • Domestic Airline of the Year for 2012 at the Roy Morgan Customer Satisfaction Awards,
  • Best Airline and Best Staff Service in the 2012 Skytrax World Airline Awards.

One of many actions that contribute to Virgin Australia’s success is its consistent engagement with its customers and its drive to provide innovative products and services, as well as the best possible customer experience for all of its guests. The airline delivers quality service by facilitating and monitoring customer feedback to continually improve the customer experience. It engages with guests in numerous ways including a guest-relations team, its websites, the Velocity Frequent Flyer program, social media channels, market-based research and focus groups, the in-flight magazine, touchpoints throughout a guest’s journey and the Guest Contact Centre.

A Positive Culture

The key to maintaining a motivated team of professionals is Virgin Australia’s philosophy that technical skills can be taught, but character can’t. So it focuses on hiring people with a lot of passion and energy, as well as a can-do attitude, who can be trained in specific job functions, which has created a positive internal culture across the business.

Providing a superior guest experience merely scratches the surface of what’s behind this exceptional airline. Virgin Australia partners with a number of organizations to help improve the lives of less-fortunate members of the communities it serves. One of the more notable organizations is the Starlight Foundation, an Australian charity that brightens the lives of seriously ill and hospitalized children, and their families, throughout Australia. Virgin Australia flies Starlight children and their families across its domestic network to a range of popular tourist destinations.

The airline is also committed to environmental sustainability. It operates a young, fuel-efficient fleet, with an average of 4.9 years. It supports the development of biofuels in several ways, including working with the aviation industry and biofuel supply chain on shared issues, as well as engaging and supporting promising biofuels projects. In addition, Virgin Australia embarked on Australia’s first government-certified airline carbon offset program.

In 2010, when Borghetti was appointed Virgin Australia’s chief executive officer, the airline was forever changed. With more than four decades of experience in the aviation sector, he has held a number of senior positions at Qantas. Prior to leaving the airline in 2009, he was the airline’s executive general manager for six years. During his four years with Virgin Australia, he has taken significant actions to put the airline on a new path that will see it well into the future.

During my visit with Borghetti, he went into greater detail about the airline’s Game Change Program and its current Game On Program, as well as several other aspects that will lead the airline into the future.

Question: In 2010, you implemented a new business strategy — the Game Change Program. How did you come up with this concept? What were the primary objectives of the strategy?

Answer: When I look back at Virgin Blue, as it was known in 2010, it was a successful airline. As a brand, it identified with budget leisure travel — and did so very well.

A New Brand

Until 2011, Virgin Australia had operated under several different national and international brands (Virgin Blue, V Australia, Polynesian Blue and Pacific Blue), which was confusing to customers and hard on brand equity. After much strategizing, the new Virgin Australia brand was born, along with a new aircraft livery.

But toward 2010, aviation in Australia had changed enormously. There were new players in the market and Virgin Blue no longer had the right cost structure to compete in the budget-market segment. So it was very clear that we had to change the model in order to grow and succeed well into the future.

So when I joined the airline in May 2010, I introduced what became known as the “Game Change Program.” The strategy was built on a number of pillars: to ensure our capacity was closely aligned to profitability; to grow our share of the Australian corporate business from 10 percent to 20 percent; to maintain our strong presence in the leisure market and to enhance our strong brand in Australia and overseas.

Q: Now that the program has been successfully executed, what type of results have you received from the program?

A: The Game Change Program has been very positive not only for our airline but for Australia as well. By providing Australian travelers with a choice for the first time in over a decade, we have delivered benefits to the local economy by lowering airfares, by creating new jobs, and we have also played a part in supporting inbound tourism by growing and investing in our domestic network and our international alliances. This is one of the most important things we can do for our country as an airline.

Now looking at our business, we are in a far more resilient position than we were in 2010. We have increased our share of revenue from the corporate and government sector to well beyond our target of 20 percent, and we have diversified our revenue mix with the launch of our regional operations and through the acquisition of 60 percent of Tiger Australia.

Q: You have moved on to what is referred to as the Game On phase of the Game Change Program. What is the premise of this phase?

A: The first phase of the Game Change Program was about laying the foundation for the airline’s transformation. Game On is about taking our strengths to the next level, while making sure we stay agile to adapt to any changes in the market.

There are really five key areas of the Game On phase. The first is the three-year business efficiency program, which is aimed at delivering gains of around US$400 million by the end of the financial year 2015. This will make sure we have a sustainable cost advantage in the future.

The second is Velocity Frequent Flyer. With 4 million members and counting, this remains a key growth opportunity for our business, and we continue to look for ways to optimize the program with our partners and members.

The third is our access to global markets, as this is another key way to drive revenue growth for our business.

The fourth is to further enhance the customer experience through innovation in-flight and on the ground by continuing to introduce new product and service initiatives.

And the fifth is our people. Everything we do will always be underpinned by our service excellence, as this continues to be our key differentiator in the airline industry.

Virgin Australia Regional Airlines

After acquiring Skywest Airlines last year, Virgin Australia unveiled its new regional airline operation with Virgin Founder Sir Richard Branson and Virgin Australia Chief Executive Officer John Borghetti. Based in Perth, Virgin Australia Regional Airlines operates more than 30 air- craft to more than 40 destinations.

Q: How has your airline’s recent business transformation, including the Game Change Program, changed the organizational culture?

A: Our airline has maintained a strong culture over the years — we have a very motivated team of passionate people.

I think an important part of this is recruitment. We would rather employ someone with a lot of energy, passion and a can-do attitude than someone who has 10 degrees. Technical skills can be taught, but character can’t, and I think that has created a very positive internal culture.

Q: Virgin Australia continues to enhance its customers’ on-ground and in-flight experience though new product and service offerings. What are some new products and services you’ve introduced during the last year? What other steps do you take to ensure a positive experience for your guests?

A: The customer experience has been at the heart of our transformation. In fact, when I look at our airline today, I can’t single out one element of the customer journey that hasn’t changed, except for our people.

Lounges have been a key focus for us as we know how important they are to corporate travelers. Since 2011, we have opened five new locations and transformed our lounges in Sydney, Melbourne and Brisbane.

We have also become the first airline in the Asia-Pacific region to offer a new wireless in-flight entertainment system, which allows customers to stream television shows, movies and music straight to their own device.

We have recently changed the way we conduct customer research to make sure that it influences our decision-making on an even more regular basis. Whether it’s major product changes or service attributes on the frontline, this research makes sure we stay on brief and if we’re down on any key metric, what we need to focus on.

Q: With more than 40 years of experience in the Australian aviation market, how do you see the commercial airline landscape in this country evolving during the next decade?

A: In my 40 years in aviation, I can’t recall one year where there hasn’t been some sort of shock to the industry — from oil price spikes to weather events. This industry operates on uncertainty, and we’ll continue to see that over the next 10 years.

When it comes to our airline, the future is very bright.

Up until now, it has really been about laying the groundwork. In less than five years, our airline has completely transformed, and we are now ideally positioned to take advantage of future opportunities.

While I can’t reveal our exact plans, I can say we will continue to be led by our passion for customer service, our drive to challenge the status quo and commitment to serving travelers across Australia.

Q: Virgin Australia has been referred to as having one of the largest virtual networks in the world. What does this mean?

A: A key aim of our Game Change Program strategy was to create a network that gave us global coverage.

We chose to do it through bilateral alliances with strategic airline partners so we could build a global network specific to Virgin Australia and its customers.

So now we have a global network that can fly our guests to more than 450 destinations around the globe and earn frequent flyer points and status credits in the process.

Q: Naturally, technology plays a big role in the effective operations of an airline. What are the key technology enablers that support your airline strategy?

The implementation of the SabreSonic® CSS is a prime example of how technology has strengthened our business.

It has significantly improved our access to global markets, expanded the airline’s interline and codeshare revenue potential and enhanced the customer experience.

This has helped drive increased penetration in the higher-yielding corporate and government market segment, and we expect it will continue to strengthen our revenue mix and have a positive impact on returns.

We also use a range of customer service technologies, such as in the Guest Contact Centre and across our sales functions, which are key to delivering exceptional service throughout the entire travel journey.

Q: What do you consider your biggest personal success during your time with Virgin Australia?

A: As you can imagine, we have overcome so many obstacles in our journey. Let’s not forget, when we first announced our Game Change Program, the general reaction was that it could never be done, and look at us today. There are many reasons for our team to feel an enormous sense of pride.

But I have to say, one of my proudest achievements to date has been the rebrand of our airline operations.

Up until 2011, the airline had been operating under both national and international brands: Virgin Blue, V Australia, Polynesian Blue and Pacific Blue, which was a confusing customer proposition.

I knew early on that this needed to change, but what lay ahead was no easy task. We had to convince Virgin management that it was the right way forward, right down to the last detail on the new aircraft livery.

It took a great deal of persuasion over the course of many months, over multiple time zones until Richard [Branson] said so aptly to me one day, “screw it, let’s do it,” and the rest is history. Our last plane will be painted in the Virgin Australia livery in January next year.

Q: What is your leadership philosophy, and how does that tie to the future of Virgin Australia?

A: A leader’s role is to provide a clear and consistent vision, to inspire and, importantly, to create hope. From there — the leader needs to provide the tools to empower everyone throughout the business to deliver on that vision.

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