Virgin boss John Borghetti’s exit date a concern

Virgin Australia’s global search to replace John Borghetti is under way but the question of when he is leaving is becoming a hot topic for the airline’s major shareholders.

Mr Borghetti announced in mid-June that he would not seek the renewal of his contract but would remain in the airline’s top job until the end of next year.

Virgin’s board, led by Elizabeth Bryan, has commissioned Maritana and Russell Reynolds to start a global search to replace the outgoing boss, who has been has been in charge since 2009.

Having a chief executive remaining in charge of a company for almost 18 months is seen as untenable and the strategic shareholders are understood to be keen for a change to be made soon.

DataRoom understands that Etihad, Singapore Airlines and the Branson Group, which control 51 per cent of Virgin, are seeking a new boss to implement a strategy to get the airline back on the path to profitability.

There has been talk that an activist shareholder could soon target Virgin and make its way on to the registry by buying a chunk of stock from Etihad. This plan is thought to be the “nuclear option” to prompt the Virgin board into action, but it would mean playing out the drama in public.

Instead, the investors are now privately stepping up pressure on the directors to fast-track the chief executive replacement plan and there are calls to act soon.

In a statement to DataRoom, Ms Bryan said she believed there was no truth to speculation Mr Borghetti could be replaced sooner than later, and that there would be a thorough search for a new chief executive.

The thinking is that a new boss coming in shortly can get the airline’s profit figures back on track sooner rather than waiting until the start of 2020 for change.

DataRoom reported last month that Virgin’s former head of domestic and international business, John Thomas, was in the frame to replace Mr Borghetti and is believed to be backed by some big investors.

If a new chief comes in soon, a pressing issue for the airline will be to finalise the investment in its next future fleet. The airline has been planning to bring on up to 40 Boeing 737 Max aircraft since it hatched the idea in 2012.

DataRoom has been told the expected capital expenditure will be about $2.5 billion and the first new plane will be delivered at the end of next year. The delivery of the fleet’s new start coincides with Mr Borghetti’s departure, with the timing of the massive investment raising questions in the industry.

Virgin has justified the new spending plans on the fact the Max planes are more efficient and would replace the ageing B737NG fleet. The new planes will be delivered gradually until December 2025.