Alan Joyce’s John Borghetti jibe sparks airline dogfight

Alan Joyce has delivered his most scathing criticism yet of Virgin Australia’s outgoing chief executive, John Borghetti.

Alan Joyce at Qantas headquarters in Mascot, Sydney yesterday. Picture: Adam Yip.

Alan Joyce has delivered his most scathing criticism yet of Virgin Australia’s outgoing chief executive, suggesting there was no comparison between Qantas and its smaller rival.

As Mr Borghetti prepares to leave Virgin after nine years in the top job, his Qantas counterpart said the transformation of the smaller airline had not delivered for shareholders.

After pointing out Qantas’s statutory half-year profit of $780 million was “10 times” that of Virgin’s $73.8m result, Mr Joyce said the “jury was still out” on whether Mr Borghetti had delivered for shareholders.

“The numbers don’t show that, the returns haven’t been good for some period of time,” said Mr Joyce, who beat Mr Borghetti to the role of Qantas CEO in 2008.

“If you look back to before the global financial crisis, the Virgin returns were quite impressive and there was a lot less capital invested. But the returns today are nowhere near what they were back then.”

He did concede his rival had “made a difference at Virgin”, turning the carrier into an upmarket, full-service airline. “It certainly made the market very competitive at both ends of the market,” Mr Joyce said.

“I’m pretty proud of how Qantas adapts to a changing environment, and we did change and we made sure that we didn’t take anything for granted and it’s worked well for us.”

$5.77 Qantas closed up 11¢ p

Former DP World and Queensland Rail chief executive Paul Scurrah will take over from Mr Borghetti on March 25, and Mr Joyce said the change of ­leadership could make Virgin “a lot more competitive”.

“From his record, (Scurrah) has got a good reputation of being very focused on financial returns and capital management, which I think is good because you need ­financial discipline in any business,” Mr Joyce said.

“He could come in and make (Virgin) a lot more competitive. We’re conscious of that and we’ve got to be the best we can be and that means keeping a focus on our cause.”

In the second half of the 2019 financial year, Mr Joyce said Qantas expected to recover the full cost of fuel, which put a dent in the first-half results.

The after-tax profit of $498m was down 16 per cent on the previous first half, largely due to a $416m blowout in the fuel bill, which totalled $2 billion.

Capacity management and higher airfares helped keep Qantas Domestic in a strong position, but Qantas International suffered a $60m drop in earnings due to the big fuel bill.

Mr Joyce said the outlook for the second half had factored in the impact of a federal election, which generally took a toll on revenue.

The previous federal election, which followed a marathon eight-week, campaign cost Qantas $20m.

“It always has an impact on demand, but $20m is not that significant in the big scheme of things when you consider that the company generates over $16bn in revenue,” Mr Joyce said.

“If you know it’s coming up you can manage that, which we believe we can this year.”

He insisted Qantas would work with whoever was in government to try to get the best for the company and its employees.

“We just want a stable, fair industrial relations environment and that’s what we’ve been saying,” he said.

“There are pros and cons with whoever is in government and you work with the government of the day and the legislation of the day.”

He expected to announce by the end of the year the future of proposed ultra-long-range flights from the east coast to London and New York, known as Project Sunrise.

Boeing and Airbus were “competing fiercely” for the opportunity to deliver suitable aircraft for the 20-hour flights, which was helping to bring down the potential cost.

But Mr Joyce said there were many major factors to consider, including new pilot contracts for such services, regulator approval and the economics of ultra-long-range flights.

“I still have to go back to the shareholders and say these billions of dollars for new aircraft are going to make a return and here’s why, but if we don’t think that case stands up we won’t press the button,” he said.

What gave him confidence Project Sunrise would come to fruition was the runaway success of the Perth-London flights on the Boeing 787-9 Dreamliner.

Mr Joyce said for the first time since 2010, the London route was making a profit for Qantas and customers were happy, particularly those in the pointy end of the plane.

“We believe because of the Perth-London service, there’s been a 30 per cent increase in visitors to Perth and we’re seeing ­really good economic benefit to the West Australian economy,” he said.

“It’s one of those things where everybody is a winner.”