What it takes to get paid $2.77m: Virgin Australia’s John Borghetti says he’s ‘tried really hard’
WHAT drives Australia’s highest-paid airline executive? Flash cars - and a lifelong dream to experience Rio’s Carnival, that’s what.
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THE man who got into airlines in order to score a cheap fare to Rio, is now the industry’s highest paid executive.
Virgin Australia CEO John Borghetti surpassed Qantas rival Alan Joyce in the pay stakes this year in what many would say was well deserved recognition for his transformation of the former low cost carrier.
But by his own standards the 59-year-old may be coming up to his use-by date as Virgin Australia’s boss.
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The industry veteran is firmly of the belief people in high-profile, high powered positions should only stick around for between four to seven years.
Having clocked up his fourth anniversary with the airline in May, Borghetti would now seem to be in the latter stages of his reign.
And he has a clear idea of what his legacy should be.
“I’d like to be remembered as someone who really tried hard,” said Borghetti in an exclusive interview on board Virgin’s brand new $221 million A330.
“If you’ve done the best you can and failed, I’d rather do that than be someone who succeeded and didn’t do their best.
“I always say to my management team you never want to die wondering and we all make mistakes. I make them every day.”
Borghetti got into the airline industry for the same reason a lot of people do — it was a great way to get cheap flights.
The Virgin Australia chief recalls watching a news reel as a teenager growing up in Melbourne and seeing the Rio de Janeiro Carnival parade.
When he asked around his friends as to how he might get there, it was suggested the only hope he had was to land a job with an airline that offered cheap flights to staff.
So the son of Italian migrants joined Qantas as a mail boy at the age of 17, and over the next few decades worked his way up to executive general manager.
He seemed a certainty to take over from CEO Geoff Dixon when he retired in late 2008 but instead former mathematician Joyce was appointed to the top job.
Six months later, Borghetti parted company with Qantas, ending a 36-year association with the Flying Kangaroo.
After a year of contemplation, he decided nothing interested him more than airlines, and he took on the job of CEO at Virgin Blue.
What happened next was unprecedented in an industry better known for downsizing and cost-cutting.
“I knew that we needed to first reposition every aspect of the airline — product, service, name,” he said.
“You needed to change the name because Virgin Blue had been established so well as a low cost carrier, but we needed to keep the Virgin element.”
The subsequent transformation was embraced by travellers, and left long-time market leader Qantas playing catch-up against a backdrop of union strife and rising costs.
Both airlines appeared to adopt an attitude of “anything you can do, I can do better” that proved almost disastrously expensive.
Airfares plummeted and aircraft underwent major refurbishments, and when Qantas started putting on two services for every one of Virgin’s it appeared Joyce had lost the plot.
Finally things came to a head this year when the airlines called an unofficial truce to their capacity war, shortly before posting massive losses.
Qantas finished 2013-14 with an underlying loss of $646 million, and Virgin reported a $211 million loss.
Executive salaries were frozen in response to the poor results. But unlike Qantas, Virgin still paid key staff bonuses.
That was enough to take Borghetti’s take home pay to $2.77 million ahead of Joyce’s $2.05 million pay packet.
Borghetti would be unlikely to think he has not earned every cent.
Incredibly hard working, the Virgin CEO has barely had a week off since joining the airline in May 2010 — and is yet to get to Rio.
He adds as many as seven boarding passes to his collection each week and is very much of the mindset that in order to make money, you have to spend it.
“We could quite easily tomorrow slash and burn — cut staff, dumb down the product, close a lounge or two,” he says.
“That would save us millions and next season’s numbers would probably look pretty good but I tell you what, in a year’s time we would’ve gone backwards.
“Our view here has always been that for the long term sustainability and profitability of the business you’ve got to do a few things that will cause some debts but we’ve got to do them otherwise we’ll never get there.”
Those “things” include the recent purchase of a brand new $221 million A330 which will fly for about six months before its cabin is reconfigured with “Super Diamond” business class suites.
The sleek look of the suites is reminiscent of the designer cars Borghetti collects but is reluctant to publicly discuss.
Housed in a warehouse half way between his Sydney home and the airport, the collection includes BMWs, Porsches and Alfa Romeos — but no Ferraris.
He sold those because they attracted too much attention on the road.
The 10 other aircraft in Virgin Australia’s fleet will attracting attention of their own on the tarmac as they get the same overhaul as the new A330, as the airline rockets towards its goal of securing 30 per cent of the corporate market by 2017.
With as much as 26 per cent already in the bag, the target seems set to be smashed and all at Qantas’s expense.
In an indication of how highly prized the business traveller is, Virgin will actually rip out nine economy class seats in each of its Boeing 777s to fit in the new high-yield diamond suites.
Borghetti says he wouldn’t be doing it, if it wasn’t going to generate more revenue for the airline.
“I’ve been in this game over 40 years and I’ve seen so many people make so many mistakes, and so many people do so many things right,” he said.
“Somewhere along the line, I like to think I’ve picked up a few ideas.
“Not all of them are right but it helps.”
And regardless of his own belief that four to seven years should be the maximum corporate shelf life, he is not going anywhere soon.
“The time will come when I’ll have to be gone (from Virgin), but I’ve still got so much to do,” Borghetti said.
“There’s still so many things I need to do.”
Originally published as What it takes to get paid $2.77m: Virgin Australia’s John Borghetti says he’s ‘tried really hard’
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