John Borghetti resigns as Virgin Australia’s CEO, here’s how a mail boy became a CEO in under 40 years.

John Borghetti, Virgin Australia CEO (Image: Virgin Australia)

Virgin Australia Management
Date Posted: 15/06/2018

John Borghetti, a familiar face throughout the aviation industry in Australia, known for his impeccable customer service skills and strong work ethic. He is a great example of how far a career can take you, no matter where your working life begins. You just have to be ready to take opportunities as they present themselves, combine them with your strong work ethic and strong customer service skills and you will succeed. John Borghetti has over 45 years in the aviation industry, working with two of Australia’s main commercial airline carriers.

Borghetti’s love of fast cars (Image: Virgin Australia)

He moved to Australia in April 1963, as a young seven year old boy, he was one of three children along with his parents that made the move to Australia. He landed at Melbourne Airport which at the time was Essendon Airport, after stepping off the aircraft and touching Aussie soil for the first time he had no idea that he would be working within the aviation industry for most of his life. He recalls being petrified of kangaroos, envisioning them as flesh eating carnivores. Little did he know that for 36 years he would end up working for a company whose brand and identity was a kangaroo, not a bouncing one, but a flying one instead.

Italy was still recovering from the aftermath of the war, there were very little opportunities for any one as the poverty levels were high. The choice to move to Australia was a simple one for his parents to make, as all they wanted to achieve was to give their children the best life they could. He was just like any other seven year old and was sent to school every day in the outer suburbs of Melbourne. He described his school life as being tough, knowing very little English after moving here he was embarrassed to show his culture knowing he would get picked on for being different, it was a tough upbringing he recalled.

His customer service experience began at the age of ten in his father’s coffee shop, when he wasn’t at school he was often seen helping out around the shop. This is what gave Borghetti the strength to become what he is today. The first job he held was in the Qantas mail room in 1973, from then on he worked his way up through the ranks, and became one of three people in contention of being the next Chief Executive Officer of Qantas. In 2009 Qantas was seeking a new CEO and a choice had to be made in regards to a replacement for Geoff Dixon who held the top spot at Qantas for eight years. Unfortunately for Borghetti he wasn’t chosen for the position and was outdone by Alan Joyce, who has been at the helm of the Flying Kangaroo for almost a decade now.

John Borghetti and Virgin Australian Crew (Image: Virgin Australia)

Borghetti made a remark in an interview back in 2017 that someone mentioned to him prior to the new CEO announcement that he would not be the next CEO, it’s like they didn’t believe that he could handle the top spot. He was known for his excellent customer service skills and continuous smile, something that he was in charge of at Qantas along with the marketing of the airline. This meant Borghetti played to his strengths, getting to know who his valued customers were and building a relationship with them. “The customer is the backbone of every business, and it’s hard to think of any business that doesn’t have customers” recalled Borghetti [1]. Learning from a young age, in his teens at the time, if you don’t look after your customers, you won’t have a business. Interaction can make all the difference as to whether a customer returns or not.

Borghetti resigned from Qantas under specific circumstances with regards to the CEO position. After working with the iconic Australian carrier for 36 years, from watching the airline develop as a government owned airline to becoming a privately listed company. Borghetti handed in his resignation to Qantas in 2009.

After leaving Qantas he had no intention in returning to the aviation industry, he thought he had worked in that field for his whole life and that he had “done his bit for the aviation industry” [1] . After all Qantas did teach him everything that he knows about aviation.

Twelve months had passed since leaving the Flying Kangaroo, and in March 2010, Borghetti moved into the top position of Virgin Blue. He was now a Chief Executive Officer, something that people thought he couldn’t achieve. He had a strong ambition to transform the “no-frills, low cost carrier” into a premium airline right from the beginning. He wanted Virgin Blue to rival Qantas in the Australian domestic market and untimely become the stronger competitor. Borghetti transformed Virgin Blue and gave it a whole new identity. It was transformed into Virgin Australia with flight codes changed from “DJ” to “VA” and the rebranding of the fleet was soon underway with new livery’s to be painted on all its aircraft, with some saying “it was made to look like a Qantas aircraft from a distance”.

John Borghetti Virgin Australia CEO (Image: Virgin Australia)

Business class was introduced to its fleet of Boeing 737’s, Boeing 777’s and Airbus A330’s. He also introduced the Velocity Rewards loyalty program and made it the huge program that it is today, selling 35% of the rewards program for $335 million at the end of the last financial year. There was one thing that Virgin didn’t have and that was a huge fleet and they didn’t service many overseas destinations. Borghetti knew that to succeed he would have to form a partnership with other carries and create a “Virtual International Network”.

Borghetti opened various airline lounges for their valued frequent flyers along with dedicated VIP lounges around the country, something that the airline never had prior to his involvement. He wanted to compete head on and capture the corporate business travellers in which Qantas held the market share of for many years with little to no competition. Borghetti knew the product, the lounges and the planes from working at Qantas, the fundamental things that appeal to business travellers.

When John Borghetti got the position at Virgin, it was in the progress of going through a financial crisis, as it was solely based around the leisure market as a low cost carrier.

In the year prior to his involvement, the Virgin Company had lost $160 million in the 2008/2009 financial year and in the years that followed Virgin had only mad a profit once during the “Borghetti Era” [2]. Throughout the 2011/2012 financial year, a profit of $27.2 million was accrued, sure it was only small amount, but any profit is good profit. Experts believe that the reason behind Virgin Australia’s profit was a result of the grounding of the whole Qantas fleet in October 2011, as a result of Alan Joyce being in charge.

“Whether Borghetti’s strategy of creating a serious challenger to Qantas was itself ill-conceived or weather he was too ambitious and tried to do too much too quickly, the financial outcomes definitely haven’t realised the ambition” [2].

Virgin Australia Airbus A330 (Image: Virgin Australia)

Speculation has always surrounded Virgin Australia, in regards to privatising the company with the board again suggesting it at the AGM, quickly shut it down saying there was no plan to privatise the company. Currently Etihad owns 21% of the carrier, Singapore Airlines owning 20% and Richard Branson’s Virgin Group holding a 10% share along with China’s HNA and Nanshan Group owning 40% between them. The partnership between HNA and the Nanshan Group are fundamental to Virgin Australia’s success, by having these shareholders it enables “connections in China that in theory could enable its modest international business and core domestic network to capitalise on the growth between Australia and China.”[2].

There are some good signs projected by Virgin Australia with its first half year earnings for 2018 resulting in a profit of $102.5 million (pre-tax earnings) which would be the most profit it has made in the last ten years.

In my own views, Virgin should have stayed as the low cost carrier that it was prior to Borghetti’s involvement, as this is where its market strength was. Possibly if it stayed as a no-frills airline there would have been no need in partnering with TigerAir. The aviation market is a tough market to capture with Borghetti being an excellent, professional and passionate CEO for Virgin Australia. His story of how he became a CEO from starting out with little to nothing after moving to Australia from Italy is a true success story.

Borghetti handed in his resignation from the top spot of Virgin Australia and will not return to the position beyond January 1, 2020. The board issued a short statement saying that he would not renew his contract. After serving eight years with Virgin, his successor is said to be an external appointment from the aviation sector, reports the Sydney Morning Herald [3].

“The board and I are grateful to John for providing a generous period of time for the search for the CEO and an appropriate transition leadership” Virgin Chair Elizabeth Bryan said in the statement [2].

The next end of financial year results will be something to keep an eye out for; will Virgin Australia continue to make a profit? We will just have to wait and see.

The cost of oil has increased recently and this will be sure to impact the profits of all airlines around the world. Competitor, Qantas announced a 3.5% increase in airfares, leaving Virgin Australia to either increase their prices or risk not making a profit.

“If Borghetti can deliver positive earnings trajectory while demonstrating that Virgin is starting to capture benefits from its relationship with HNA and Nanshan, he won’t erase the lost decade of financial performance but he will hand over a decent airlines and a more stable business to his successor” [3].

Borghetti’s work to the aviation industry hasn’t gone un-noticed, in 2017 while at the helm of Virgin Australia he was recognised in the Australia Day honours, for his contribution to the aviation industry over the past four decades. He was honoured with admission as an Office of the Order of Australia (AO). The official citation said Borghetti was recognised “for distinguished service to the aviation industry, to the development of national and international tourism opportunities, as a supporter of the arts and sport” [4].

He is proud that his family made the move to Australia back in 1963, as it reinforces that Australia gives everyone opportunities. Borghetti said to Ross Greenwood that he has transformed the aviation industry and has brought competition, not just in cheaper prices but in the level of service. Reiterating that a strong business is built on customers and the interaction between the Virgin Australia staff and their customers makes all the difference. It has nothing to do with the hard product. All airlines are the same, slightly different but the main difference is in the staff and that’s his point of differentiation. “Staff make the difference” not the livery, and makes a remark that he “works with some of the best staff in the world, they are outstanding” said Borghetti. [1]

“It’s the ability to make a difference, and the attraction of doing something that everyone says cannot be done is alluring” he commented. [1].

Ross Greenwood, asked Borghetti in an interview “What’s something that you could say to anyone else that was starting off exactly the same as you did?”

“[It] doesn’t matter what career you have, but work with what you have got. Do it to the best of your ability, even if you’re a mail boy, be the best mail boy in the world! If you take that approach, Australia is a country of opportunity that recognises that, and opportunities will present themselves. If your too busy trying to work out your next step, you won’t do your current job well and that is fundamental” responded Borghetti. [1].

John Borghetti, Virgin Australia CEO (Image: Virgin Australia)

The airline industry is not an easy industry to work in, as there are so many factors to include, but at end of the day it all comes down to customer confidence. Both Qantas and Virgin Australia, and in fact any other airline in the world goes through many ups and downs, but as long as they recover that’s the important part. The last thing we need is another airline collapsing.

It’s Borghetti’s “I don’t fail” attitude that has gotten him to where he is today, there’s no doubting that.

Everyone has their own opinion of John Borghetti, but there is no doubting that his story of achievement is inspiring to everyone.

As the Sydney Morning Herald put it “Reviews on his performance will be – ought to be – mixed”[3].

Borghetti, now in his 60’s will no doubt take a back seat board positon. At present he sits on the board of soft drink giant Coca-Cola Amatil. He does mention his love of vintage cars and the progress of rebuilding them might go up a few notches following his departure from Virgin Australia.

The launch of Virgin Australia (Image: Flight Centre)

References
[1] – 2GB 873AM (2018). Money News. From Mail Boy to CEO. Available at: https://www.2gb.com/podcast/from-mail-boy-to-ceo/ [Accessed 15 Jun. 2018].
[2] – Ferguson, A. (2018). Cheaper tickets, better service the legacy of high-flying Borghetti. The Sydney Morning Herald. Available at: https://www.smh.com.au/business/companies/cheaper-tickets-better-service-the-legacy-of-high-flying-borghetti-20180612-p4zkwg.html [Accessed 12 Jun. 2018].
[3] – Bartholomeusz, S. (2018). Teflon John’s financial outcomes didn’t match his ambition. The Sydney Morning Herald. Available at: https://www.smh.com.au/business/companies/teflon-john-s-financial-outcomes-didn-t-match-his-ambition-20180612-p4zkxv.html [Accessed 12 Jun. 2018].
[4] – Australian Aviation (2018). Virgin Australia chief executive John Borghetti receives Australia Day gong – Australian Aviation. Australian Aviation. Available at: https://australiananaviation.com.au/2017/01/virgin-australia-chief-executive-john-borghetti-receives-australia-day-gong/ [Accessed 15 Jun. 2018].

Be the first to comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.