Borghetti airline CEO of the year?

[777]

They call it NBO – the New Borghetti Order. The acronym passes the lips of staff at Virgin Village, theBrisbane operational headquarters of Virgin Australia, to comment on how their company has positively changed under the past one and a half years of CEO John Borghetti's tenure. CAPA last night inSingapore recognised Mr Borghetti's leadership by awarding him the honour of Airline CEO of the Year 2011, a distinction typically bestowed on a chief executive after years of service, but such are the achievements of Mr Borghetti.

Gravitas of John Borghetti, CEO of the year, leads Virgin Australia and its content employees | CAPA

I have no idea who the other candidates might have been but i do the think the job JB has been doing at VA is exceptional. It remains an unfinished project and probably will be for a while (there is the small matter of a profit for example!) but as a long term VA flyer the transformation in quality of product and service, morale and strategy is incredibly impressive and i'd be very confident it will pay dividends in the next few years.

Must have been a tough decision between him and AJ

 

[Noob]

The sheer amount of work he has been able to accomplish over his short time at Virgin is astounding, he truly deserves this.

 

[elbarto]

If I was a shareholder, I wouldn't be too convinced that he's deserving of this accolade just yet.

 

[LiamR]

If I was a shareholder, I wouldn't be too convinced that he's deserving of this accolade just yet.

I'm a shareholder, and I see him investing in the future of the airline and setting it up to make profits over the next few years.

Congratulations JB, in my eyes it's not easy to turn a company from a LCC into a Premium Airline, but he's done it all in the space of 12 months.

 

[777]

If I was a shareholder, I wouldn't be too convinced that he's deserving of this accolade just yet.

FWIW, I am a shareholder (albeit a very tiny one) and i'm very convinced. The share price has bounced around appallingly this year but very little of it has had to do with the airline itself - a lot it is external factors. My shares are currently up about 10% from when i bought them but i suspect they'll drop again and i see this a medium term investment. From observations on the ground i'd be pretty confident that VA will extract a major improvement in yield from a (relatively) small investment in the product. I don't think the effects will flow through to the bottom line until the next year or two though.

Between QF and DJ right now it really is a clash of visions. I think Borghetti believes in investing in the people and the product to create value. QF seems to be entirely of the view that slashing costs is the route to profit. There are obvious dangers in both approaches - for DJ it's in raising its cost base and not having the improved yield materialise. For QF it's that they trash the brand, lose the premium that were once able to charge and destroy loyalty and morale. Time will tell which is correct - it may be neither or both.

 

[Noob]

I would prefer a CEO that invests in long term profit rather than a short term profit at the demise of the companies future. Very, very few CE's have the guts to do this as it often means less in their pocket for the time being.

I am also a small shareholder.

 

[Robert K]

If AJ hadnt cut off the dead weight. There wont be future profits to be had.

 

[777]

If AJ hadnt cut off the dead weight. There wont be future profits to be had.

Some would argue AJ is the dead weight

 

[straitman]

If AJ hadnt cut off the dead weight. There wont be future profits to be had.

Some would argue AJ is the dead weight

Relevance to the thread :?:

 

[moa999]

I would prefer a CEO that invests in long term profit rather than a short term profit at the demise of the companies future. Very, very few CE's have the guts to do this as it often means less in their pocket for the time being.

Its interesting but I see this as exactly what AJ is doing now.
Negotiate very hard with the unions to get back to the right long-term cost base (those same unions who agreed to better deals with DJ), invest in a new airline in Asia to enable more flight connections on your own metal and protect the profitable part of international - with all the strikes and publicity none of this is doing the QF brand, profit or share price any good in the short term - it is very much a long term view

Much easier for JB starting from a low cost base, but he has done a superb job of executing quickly and getting things moving

 

[777]

Relevance to the thread :?:

The award in question was given to an airline CEO based on the judges' estimation of their performance relative to other international airline CEOs. The winner of the award was passed up for the role of CEO of Qantas but has gone on to be awarded (by one noteworthy but subjective measure) a major award for which the person who beat him to the QF role was also eligible. I would have thought some discussion of their relative performance was entirely on topic in that context.

 

[777]

Negotiate very hard with the unions to get back to the right long-term cost base (those same unions who agreed to better deals with DJ)

To be honest i think that sentence sums up the challenge/ dilemma/ difference in strategy. I think Qantas has decided to be confrontational to its unions and its workforce [FWIW it may well need to be, i genuinely don't know] while VA under JB has decided to pursue a strategy of engaging the workforce around the changes he wishes to make and bringing them along. The improvement in morale and quality of service at VA in the last year or so is tangible and is a genuine asset to the organisation. I am not convinced that either Qantas or the unions are genuinely "negotiating" - i think both sides have decided there is more to be gained from playing out a war of attrition with each other than collaborating to find common ground.

I would imagine if JB were leading Qantas he would have pursued a similar strategy to the one he has pursued at VA but who can ever know. It's certainly easier coming off a lower cost base. The problem with an airline playing out a war of attrition (as opposed to the mining industry where the Qantas chair cut his teeth) is that its a service industry and can not simply be measured in units shifted - they are always being measured against the service delivered. You can push very hard to improve the bottom line but if in doing so you lower the brand value - the reputation, the reliability, the morale, etc - at some point the cost of striving for those savings becomes greater than the savings themselves. Qantas clearly thinks those costs are worth baring. As i said above time will tell which is correct and it may be neither or both.

 

[cove]

Congratulations John Borghetti.....that is not an easy award to win.
I bought VBA shares when I saw about 50 members visiting the Virgin status match page and I am glad I did as the price improved 25% so imagine what could happen if they start making money!

 

[codash1099]

To be honest i think that sentence sums up the challenge/ dilemma/ difference in strategy. I think Qantas has decided to be confrontational to its unions and its workforce [FWIW it may well need to be, i genuinely don't know] while VA under JB has decided to pursue a strategy of engaging the workforce around the changes he wishes to make and bringing them along. The improvement in morale and quality of service at VA in the last year or so is tangible and is a genuine asset to the organisation. I am not convinced that either Qantas or the unions are genuinely "negotiating" - i think both sides have decided there is more to be gained from playing out a war of attrition with each other than collaborating to find common ground.

I would imagine if JB were leading Qantas he would have pursued a similar strategy to the one he has pursued at VA but who can ever know. It's certainly easier coming off a lower cost base. The problem with an airline playing out a war of attrition (as opposed to the mining industry where the Qantas chair cut his teeth) is that its a service industry and can not simply be measured in units shifted - they are always being measured against the service delivered. You can push very hard to improve the bottom line but if in doing so you lower the brand value - the reputation, the reliability, the morale, etc - at some point the cost of striving for those savings becomes greater than the savings themselves. Qantas clearly thinks those costs are worth baring. As i said above time will tell which is correct and it may be neither or both.

Of course, the unions will be very aware of the difference in the deals they have with the two companies. After they've settled with QF (assuming they ever do), don't be surprised if they turn their attention to VA, good morale notwithstanding.

 

[777]

Of course, the unions will be very aware of the difference in the deals they have with the two companies. After they've settled with QF (assuming they ever do), don't be surprised if they turn their attention to VA, good morale notwithstanding.

There has always been a difference between VA and QF though which has not, in and of itself, forced VA's cost to rise. Furthermore VA have wisely locked in their work force sooner rather than later. We will see i guess, my assessment is that labor relations under Joyce/ Clifford at Qantas are uniquely toxic - whether it's cause or effect they have made it their express intention to break the union. I don't see any reason to assume that it follows that any other airline will suffer from the same problems or indeed that Qantas would have suffered from them to the same degree if the leadership had tried a different tack.

 

[amaroo]

I wish Mr Borghetti nothing but good fortune. If he can make a success out of it, there will be many winners not least the Australian flying community.

He may do a "Steve Jobs" - gets dumped & they then plead for him to return.

Stuff of dreams & I wish him all the best.

 

[UP4014]

Good on him, he has started to make improvements, next will be the the full service airline status.

And to think QF could have had him as leader but decided AJ was the way to go.

 

[nlagalle]

There has always been a difference between VA and QF though which has not, in and of itself, forced VA's cost to rise. Furthermore VA have wisely locked in their work force sooner rather than later. We will see i guess, my assessment is that labor relations under Joyce/ Clifford at Qantas are uniquely toxic - whether it's cause or effect they have made it their express intention to break the union. I don't see any reason to assume that it follows that any other airline will suffer from the same problems or indeed that Qantas would have suffered from them to the same degree if the leadership had tried a different tack.

I wouldn't say they have locked in their EBA's "sooner rather than later" rather their EBA's are on a different time line to QF. Theirs will come up in the next couple of years and will be interesting to see what happens there. They have clashed with the unions in the past.

I do think JB has done a fantastic job. It's good to have 2 strong airlines here.

 

[777]

I wouldn't say they have locked in their EBA's "sooner rather than later" rather their EBA's are on a different time line to QF. Theirs will come up in the next couple of years and will be interesting to see what happens there. They have clashed with the unions in the past.

I meant in contrast to QF who have let several of their key agreements expire simultaneously - hence the ability of their workers to take protected industrial action.

 

[straitman]

I would have thought some discussion of their relative performance was entirely on topic in that context.

No argument on that but a one liner about AJ being the dead weight is hardly 'discussion' IMHO