After the Virgin Australia storm, Paul Scurrah’s smooth landing

The former Virgin boss and now new chief of freight group Pacific National, Paul Scurrah, is not one to be underestimated.

Pacific National CEO Paul Scurrah in Brisbane. Picture: Lyndon Mechielsen/The Australian

It was a powerful image that said so much about a moment in the life of Paul Scurrah.

A month after his shock departure from the CEO role at Virgin Australia in October last year, he was photographed at his Brisbane home sitting by the pool wearing a T-shirt emblazoned with the words “Underestimate me, that’ll be fun”.

“The truth is, that was complete coincidence. Nicole (his wife) bought me that T-shirt. It was designed to be messing around the house in,” Scurrah now says with a wide smile.

He had agreed that morning to meet with a journalist at a coffee shop not far from his home for a catch-up chat. He didn’t shave, donned his shorts, baseball cap and the now famous top.

What he didn’t know was that a photographer would be waiting at his home to snap him straight after the coffee meeting.

“In hindsight, I should have turned the T-shirt inside out because I just knew I was opening myself up. But the amount of supportive comments I got about the message I was sending was hilarious,’’ he says.

“I think it was one of those sort of cosmic alignment moments where it happened by accident but also for a reason.”

It’s now corporate folklore that the popular leader of Virgin – which collapsed last year owing debts of $6.8bn and was rescued by Bain Capital – was ousted by its new private equity owner after just 20 months in the job, replaced by former Bain partner and Jetstar CEO Jayne Hrdlicka.

Former Virgin chairman Elizabeth Bryan recently summed up Scurrah’s treatment when she mused, bluntly: “It was a brutal ­demise. He was used through the difficult part of the process and the tables turned on him at the last moment.”

Friends of Scurrah claim he was betrayed by Bain, that he fell out with Hrdlicka and that his treatment set the airline back culturally in terms of its relations with staff. But the man himself will add nothing to the speculation.

“I’m extremely fond of my time at Virgin and have great affection for the people of the airline. So I’m thrilled to see the market coming back, and that gives them a much brighter future which they deserve,” he says.

Earlier this year 53-year-old Scurrah was hired by the major shareholders of Pacific National, the nation’s largest private rail freight operator, to replace then chief executive Dean Dalla Valle.

Pacific National (PN) is owned by a group of pension and sovereign wealth funds spearheaded by US infrastructure investment heavyweight Global Infrastructure Partners.

Scurrah was well known to GIP given that, before joining Virgin Australia in March 2019, he spent five years as CEO of stevedoring giant DP World Australia, and previously headed Queensland Rail.

GIP is a big investor in the Port of Brisbane, while PN’s board also includes GIP representatives Russell Smith (a former Port of Brisbane CEO) and ex-Credit Suisse Australia boss Rob Stewart.

But before he took the PN job, Scurrah had been mentioned as a contender to run Australia Post following Christine Holgate’s resignation over a decision to reward executives with Cartier watches. He had served on the ­Australia Post board for two years from 2017 before joining Virgin.

There was also speculation about him being approached to run the James Packer-backed Crown Resorts and media giant Nine Entertainment.

Scurrah says he was never approached about the Nine job, but confirms his interest in the roles at Australia Post and Crown

“There was interest and it was at the exploratory stage,” he says.

“I am not the type to go through a process for the process stake or for ego either. So I was pretty clear to them that I wouldn’t be involved in the processes.”

Crown seemed a strange fit for Scurrah and, while he was wary of the company’s gaming operations and the regulatory risk associated with multiple inquiries afoot into the casino giant, he did have interest in other aspects of Crown.

“I still have a healthy interest in the tourism industry and quality product and that part of Crown I think is an icon in the country. That would have triggered some interest,” he says. “Having been a customer of theirs for quite some time and enjoyed staying at the properties, it is a brand and a product that I really like.’’

Scurrah would also have been wary about the presence of another global private equity giant in Blackstone on the Crown register, and the potential for the company – as Virgin was – to be privatised.

“What attracted me about Pacific National was the stability that their owners and their balance sheet and the future of intermodal transport gave me,” he says.

PN is at the heart of the ­nation’s supply chains, moving more than 4500 cargo containers holding fresh and refrigerated food, beverages, white goods, ­electronics, furniture, household items, building supplies and ­machinery parts through the Sydney Freight Terminal each week.

Its 2300 frontline workers – out of a total workforce of more than 3300 – operate up to 800 services for 340 customers each week out of 70 terminals and depots spread across the mainland.

The group has been operating at peak capacity for the entire year due to the surge in demand for ­capacity across intermodal freight corridors caused by Covid.

Recently, PN leased 130 extra wagons to support its operations.

Scurrah says Covid “has really elevated rail as the safe and ­efficient way to haul”. He says: “A lot of that comes from consumer spending changes and a lot of ­people have been relocating. So furniture movement has been an important part of our business.

“We are really bullish about the intermodal side of our business. We intend to out-grow the market. We have plans to increase our reliability and serviceability, which will make it even more ­attractive.”

Accounts for PN’s operating entity, Pacific National Holdings – lodged in August with the Singapore Stock Exchange for the group’s Medium Term Note Program – reveal it reported a net profit after tax of $198.5m in the year to June 30, up from $151.8m a year earlier.

Earnings before interest, tax, depreciation and amortisation was $811.5m, up from $770.4m, underpinned by improvements in containerised freight volumes with the conversion of more freight from road to rail.

PN’s holding company, Australian Logistics Acquisition Holdings, also lodges accounts with ASIC, including accounting losses associated with the treatment of debt and equity funding and their consolidation under local financial reporting standards.

The most recent accounts lodged with ASIC show ALA booked a $339.7m net loss in the 2019-20 financial year, slightly less than the $404.8m loss it reported a year earlier. The latest accounts will be lodged before the end of November.

In September, PN secured a 10-year, $400m non-bank financing package from sovereign wealth funds and other financial investors in Asia and the US, which Scurrah says shows confidence in its business model. The issue was more than two times oversub­scribed.

A key selling point in the raising was PN’s strong ESG performance credentials. Road freight produces 14 times greater accident costs than rail freight per tonne kilometre and 16 times as much carbon pollution. Scurrah says the firm is working on “deep ESG plans”, saying: “At the same time as Covid playing out, there has been a significant shift at the corporate level around ESG. A lot of procurement policies in companies are starting to have an ESG weighting in their decisions.

“We are seeing a number of our bigger customers flip their focus. Rail used to be the overflow and road the base. And now we are seeing the reverse.”

PN remains the biggest hauler of thermal coal in the nation and Scurrah makes no apologies for it, but with an important caveat.

“We don’t intend to grow our asset base around thermal coal,” he says. “There is not a lot of appetite for ­investors to do that. But we are ­focused on supply chain ­excellence for what we see is going to be an enduring demand for thermal coal.”

As part of the growth plan in intermodal (containerised) freight, PN recently commissioned a fleet of 50 new locomotives that will be more environmentally friendly, with lower emissions and greater fuel efficiency.

Scurrah says the firm is “very balanced” about its views on coal and wants to ensure clean Australian thermal coal remains available to the global market.

“If we swing too far and that doesn’t happen and Australia shuts it off too early, then the world is actually worse off. Because while there remains an appetite for coal, they will have to get lesser quality from somewhere else in the world. So it’s got to be a balanced view,” he says.

“We totally understand our obligation to play our part in reducing emissions and we’re very focused on that as well. But while the world is consuming coal, we need to play a role in making sure the best quality is available.”

In 2014 Scurrah made headlines at DP World when he moved to transform the ­blokey, male-dominated culture on the waterfront, putting in place strict new rules designed to lift standards, including banning swearing in the workplace.

He jokes such mandates have not been needed at PN, noting “my reputation must precede me”.

He calls the PN working culture “respectful and proud”.

“One thing that we are taking advantage of right now is just helping our frontline understand the important role they play in the Australian economy,” he says.

“It’s been a real challenge to keep supply chains open, there’s been a massive amount of change and a massive amount of oversight from health regulators, which there has never been before about what can happen with train drivers going into one precinct and out of another.

“So the team has really rolled its sleeves up and stepped up to the plate to manage the record volumes. So culturally, the pride is ­absolutely something I want to preserve.”

Paul Scurrah wearing his famed T-shirt at home last year. Picture: NCA NewsWire / Dan Peled

Scurrah has long lived by a simple mantra in any business he runs: success means finding the right balance between happy ­people, happy customers and happy shareholders.

“I often say, earned and learned through hard experience, that if you mix up that balance, it can be pretty uncomfortable. So it’s about keeping most people mostly happy, most the time,” he says.

On this score there is still plenty of work to do, depending on the particular arm of the PN business and its geographic location.

“I don’t think we’ve got that balance 100 per cent right just yet. Sometimes we have been guilty across all three, trying to be all things to all people and it means there is the opposite effect where nobody is as happy as they should be,’’ he says.

Scurrah continues to serve as a non-executive director of the under-pressure AFL expansion club the Gold Coast Suns, and vows to “stick around for some success” after the club delivered one of its most competitive seasons this year.

Beneath his affable, down-to-earth exterior, Scurrah will always be a fighter. He has bounced back from the disappointments of his Virgin experience. He still has his famed T-shirt, even if you won’t see him wearing it in public again any time soon.

“I’m a very competitive and proud person. I like to raise the bar myself and compete with expectations and sometimes it suits me to believe that I need to prove something to someone,” he says.

“I could point to parts of my past where I felt as if I was to taken a little lightly or underestimated. I proved them wrong.”