Virgin Australia boss John Borghetti talks up airline’s future

Virgin Australia chief John Borghetti says it will increase its headcount as new routes to the US and Asia open up.

Virgin Australia CEO John Borghetti in Brisbane yesterday. Picture: Peter Wallis

Virgin Australia chief John Borghetti has moved to temper board and shareholder disappointment over the airline’s languishing fin­ancial state, saying it will increase its headcount over the next three years as new routes into the US and Asia open up and as it continues on its recovery to profit.

The airline yesterday fronted shareholders at its annual meeting in Brisbane, where chairwoman Elizabeth Bryan said the company would maintain an “unwavering” focus on repairing its financial foundations that had taken a serious hit as it embarked on its ambitious $300 million, three-year cost-cutting program.

Mr Borghetti said that, while industry conditions remained tough, the airline was on track with its cost-cutting program and that it was continuing to monitor capacity to balance softening demand.

He added that the airline’s rationalisation of its fleet was continuing, with Virgin having sold four Embraer 190s, with the sale of the fifth to be completed by the end of the month.

Mr Borghetti said that there would a “right sizing” of its workforce, which would see a flattening of its management ranks, but that overall its headcount of 10,000 staff would increase as it chased new opportunities in Asia and the US.

“I expect to grow over the next three years,” he said. “We are going to operate Melbourne to Los Angeles and we need people to fly that; we need ground people. We are going to fly to Asia and we will need people up there. So jobs will grow. American and Asia for us, ­internationally, is frankly our ­future.”

Shareholders from the airline’s small free float of about 8 per cent addressed Ms Bryan and the airline’s management with a mixture of praise and criticism as the company added new board members.

One shareholder, Chris, who represents his family super fund, expressed his “bitter disappointment” with Virgin’s recovery, saying the airline and smaller shareholders were being short-changed by the airline’s major shareholders — which include Singapore Airlines, Etihad and Chinese conglomerates Nanshan and HNA — who the investor said were only in it to further their own agendas.

“All the major shareholders are there for their own business and I don’t believe Virgin is seeing the benefit of that today,” he said.

Ms Bryan responded by saying that although that disappointment was widely shared among Virgin’s large shareholders, the company’s management team and its board were pulling in the same direction to get the airline profitable again. “None of the shareholders have been happy with the movement in the Virgin share price: neither the board nor the management team,” she said.

“(But) we are growing this company, we are investing in this company, we are reducing the cost base of this company and making this company operate more ­efficiently.

“All we can really do is work on the business and allow the improvement in the business to shine through.”

At yesterday’s annual meeting, the airline’s shareholders voted in favour of adding representatives from Chinese conglomerates HNA and Nanshan to join Virgin’s board. Together, the two Chinese companies hold about 40 per cent of Virgin’s shares.

An independent director, Ken Dean, who sits on the Energy ­Australia and BlueScope Steel boards, was also appointed to the board.

With the three additions, Virgin’s board is now made up of 12 members, which is more than Qantas and Commonwealth Bank have on their respective boards.

But despite the high number of directors, Mr Borghetti said he did not think decision-making would be paralysed by all the competing interests.

“As shareholder nominees have increased consequently we’ve had to increase the number of independent directors,” Mr Borghetti said.

“They are all focused on Virgin Australia. I haven’t seen any of them behaving in any way other than that, so I’m very comfortable with that.”