Virgin Blue's class struggle

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This was published 13 years ago

Virgin Blue's class struggle

Flying colours ... Virgin Blue's new chief executive, John Borghetti.

Flying colours ... Virgin Blue's new chief executive, John Borghetti.Credit: Peter Braig

Virgin Blue's new management wants to win over business-class passengers from Qantas, writes Clive Dorman.

A watcher of the Australian airline industry once observed that Qantas was becoming more like Virgin Blue and Virgin Blue was becoming more like Qantas. Now that Virgin Blue co-founder Brett Godfrey has retired, the distinguishing features of Australia's two main airline groups are more blurred than ever.

The new chief executive of Virgin Blue, John Borghetti, the former No. 3 executive at Qantas, has brought with him a raft of Qantas executives for an assault on Qantas's near-monopoly on the Australian business travel market.

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Though Virgin Blue has shed most of the hippie glad rags of the no-frills backpackers' airline it used to be - introducing upmarket facilities such as business lounges, valet parking and live in-flight TV - its efforts to woo the big end of town have so far been a failure.

It's thought that Virgin Blue commands only about 10 per cent of the Australian business travel market that Qantas inherited when its chief rival, Ansett, disappeared.

Most of the doubling of the market since then - to more than 50 million passenger trips a year - has been in the number of leisure flyers on holiday routes along the east coast.

Last week the management of long-haul international subsidiary V Australia was formally integrated into the Virgin Blue structure - the first in a series of consolidations.

Borghetti has signalled his intention to establish separate business-class cabins on the airline's aircraft - a major departure that spells the end of Virgin Blue as an orthodox "low-cost airline" and its beginning as a low-cost, full-service airline with user-pays options in the cheap seats.

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Borghetti also wants to simplify the structure to assimilate Pacific Blue, a division that, like V Australia, was given a separate name that doesn't involve the word "Virgin", an increasingly strange legacy of a deal done more than a decade ago when Singapore Airlines bought half of Virgin Blue stepmother Virgin Atlantic.

Apparently fearful of competition in key Asian markets, Singapore Airlines extracted from Virgin Atlantic founder Sir Richard Branson an agreement banning the use of the Virgin name in any new international venture.

That agreement might have seemed a relic from a bygone era, especially with speculation that Borghetti's Virgin Blue might seek membership of the Star Alliance, of which Singapore Airlines is a member but which has no Australian affiliate.

The plan to simplify the group's branding under the Virgin name is one of the internal conundrums being addressed by Borghetti and his new executive team.

"There are a lot of things being done at the moment internally … figuring out exactly what we can and can't do and developing a strategy around that," says spokeswoman Danielle Keighery. "John [Borghetti] doesn't like to give too much away before we're ready to go out there and do it. I wouldn't expect to be seeing too much in terms of changes [announced] until next year."

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