2019 CEO Survey: Paul Scurrah, Virgin Australia

Virgin Australia CEO Paul Scurrah.

Every year The Australian’s John Durie asks some of the biggest names in Australian business five key questions about what’s coming in the year ahead.

Here, in his own words, is what Virgin Australia’s Paul Scurrah sees ahead in 2020.

You can read more from the CEO Survey across this summer.

How is your company affected by low-interest rates and what is needed to boost the economy?

We support interest rate cuts as a short-term measure to stimulate some growth and restore consumer confidence, however, their impact is limited. In an environment where business investment is low and confidence is struggling, it’s unlikely rate cuts alone will boost the economy. To facilitate growth, policy should focus on removing barriers to employment and promoting investment in people and projects.

What is the impact of government regulations on your company including those applying to the financial sector?

We understand the need for regulation and oversight of the financial sector, however, the increasing risk aversion on the part of our banks and institutions can and has led to a reduced appetite for lending which has flow-on impacts on economic activity. Recent governments have a history of implementing short-term adjustments to the tax system to stimulate the economy and/or revenue intake with varying degrees of success but have largely ignored major systematic reforms that will promote longer-term economic benefits.

The general uncertainty in the tax system is an impediment to growth and investment.

What percentage of company revenues are spent on research and development and how is your company using technology to improve performance?

We’re incredibly focused on technology from a customer perspective. Our mobile app is very important as it’s a key channel our customers interact with throughout their journey with us.

It’s a technology we’ll continue to invest in to enable a frictionless customer experience. Technology to manage and harness data is also critical for the airline to improve the service and products we offer our customers and to make sustainable operational improvements.

We are one of the biggest players with our Velocity program that now has 10 million members. We are also taking advantage of technology from a sustainability perspective. In August, we became the first Australian airline to introduce split scimitar winglets to reduce drag on the wing. They save more than 160,000kg or 515 tonnes of carbon, per aircraft, per year. We have also trialled the use of biofuels. In 2019, we worked with partners to deliver the country’s first trial of sustainable aviation fuel at Brisbane Airport.

What are the three major policy issues facing the country and what should be done about them?

● Economic growth: Given the aviation industry’s high exposure to fluctuations in the economy, Virgin Australia is supportive of policy initiatives that generate economic growth, lift productivity and support competition. We welcome government initiatives to help restore growth, including infrastructure spending, tax cuts and other policy levers that can help stimulate the economy.

● Tax policy: The general uncertainty in the tax system can be an impediment to growth and investment and creates complexities and inefficiencies for companies. Clear policy focused on reforms towards a simplified tax system should promote business confidence and investment in projects.

● Climate: It is imperative for all parts of the aviation industry to work together to help accelerate options to reduce carbon emissions. Virgin Australia absolutely has a role to play and it’s in the interest of our customers, people and shareholders to be part of the low carbon economy. In order to combat the global challenge that climate change poses, all industries need to be focused on finding ways to reduce carbon. We need industry and government working in partnership to ensure targets can be reached, and a more sustainable future can be realised.

What are the major impediments to long-term growth facing your company and what can or is being done about them?

● Trade tensions and their impact on confidence and economic activity. In response to slowing GDP, we seek to remain as efficient and resilient as possible and look to Governments to provide policies to drive economic growth.

● Exposure to oil prices. Despite a robust hedging strategy, jet fuel is one of the largest expenses for us as an airline. We seek to maintain a young and fuel-efficient fleet to remain competitive.

● Airport monopolies and the lack of effective constraint on their ability to exercise market power is a continuing issue for us. Like the ACCC, we have argued very strongly for commercial arbitration. This would be an efficient and effective dispute resolution mechanism for encouraging airports and airlines to negotiate commercial outcomes. We will continue to bring this issue to the government’s attention and pursue these regulatory reforms. Additionally, airport movement caps constrain our ability to move passengers at peak times.