Brad Myer
3rd June 2010, 08:14 AM
NEW Virgin Blue boss John Borghetti hopes a redesign of the airline's networks, service and seating will double its share of the corporate market.
Less than a week after the airline shocked the market by cutting its profit guidance by up to 75 per cent, Mr Borghetti has confirmed the airline has an extensive review under way that includes shelving or streamlining low-fare domestic routes, and throws the spotlight on loss-making New Zealand operations and a possible revamp of V Australia.
The centrepiece of Mr Borghetti's strategy is a reduction in the airline's exposure to the leisure market and aiming to grab a bigger share of the corporate market.
Mr Borghetti told analysts from Macquarie Equities Research that he wanted to boost Virgin's share of the domestic corporate market from about 10 per cent to at least 15 per cent over the next 12 to 24 months.
However, The Australian understands the real target is closer to 20 per cent.
The new chief executive, who was instrumental in securing Qantas's massive market dominance in the corporate market, has already hinted at changes that would give premium customers better seating, revamped lounges and improved service on the ground and in the air.
He told the Macquarie analysts he believed efforts to date had been only marginally successful and loyalty would be a key focus.
For example, Virgin's reservations system, due to come online in November, would recognise and reward loyal passengers.
Other potential changes included a move to bring the four brands under one umbrella -- something difficult to achieve because of Singapore Airlines' veto over the use of the Virgin brand on international flights -- and the expansion of the group's patchwork of international alliances. The analysts suggested a major alliance with Singapore could be on the cards, or a closer relationship with Virgin Atlantic over Hong Kong.
International carrier V Australia, which was losing money and was not likely to break even this year, was also under a network review, the analysts said.
Virgin has indicated it is likely to at least delay the delivery of V Australia's final two Boeing 777s, and Macquarie speculated that leisure routes such as Fiji and Phuket were likely to be axed, while flights could be switched from Sydney to Melbourne or Brisbane.
The analysts expected the review of the Virgin network to be concluded by the end of this month but said it would take at least six months to assess Mr Borghetti's "clear strategy of restructuring and repositioning".
"Given his in-depth knowledge of Qantas from his previous role, Borghetti is ideally suited to lead VBA's strategy of attacking QAN's lucrative domestic business market and reducing exposure to the leisure market," they said.
"Clearly, however, there will be some execution risk."
Anyone willing to guess which routes will be dropped?
Less than a week after the airline shocked the market by cutting its profit guidance by up to 75 per cent, Mr Borghetti has confirmed the airline has an extensive review under way that includes shelving or streamlining low-fare domestic routes, and throws the spotlight on loss-making New Zealand operations and a possible revamp of V Australia.
The centrepiece of Mr Borghetti's strategy is a reduction in the airline's exposure to the leisure market and aiming to grab a bigger share of the corporate market.
Mr Borghetti told analysts from Macquarie Equities Research that he wanted to boost Virgin's share of the domestic corporate market from about 10 per cent to at least 15 per cent over the next 12 to 24 months.
However, The Australian understands the real target is closer to 20 per cent.
The new chief executive, who was instrumental in securing Qantas's massive market dominance in the corporate market, has already hinted at changes that would give premium customers better seating, revamped lounges and improved service on the ground and in the air.
He told the Macquarie analysts he believed efforts to date had been only marginally successful and loyalty would be a key focus.
For example, Virgin's reservations system, due to come online in November, would recognise and reward loyal passengers.
Other potential changes included a move to bring the four brands under one umbrella -- something difficult to achieve because of Singapore Airlines' veto over the use of the Virgin brand on international flights -- and the expansion of the group's patchwork of international alliances. The analysts suggested a major alliance with Singapore could be on the cards, or a closer relationship with Virgin Atlantic over Hong Kong.
International carrier V Australia, which was losing money and was not likely to break even this year, was also under a network review, the analysts said.
Virgin has indicated it is likely to at least delay the delivery of V Australia's final two Boeing 777s, and Macquarie speculated that leisure routes such as Fiji and Phuket were likely to be axed, while flights could be switched from Sydney to Melbourne or Brisbane.
The analysts expected the review of the Virgin network to be concluded by the end of this month but said it would take at least six months to assess Mr Borghetti's "clear strategy of restructuring and repositioning".
"Given his in-depth knowledge of Qantas from his previous role, Borghetti is ideally suited to lead VBA's strategy of attacking QAN's lucrative domestic business market and reducing exposure to the leisure market," they said.
"Clearly, however, there will be some execution risk."
Anyone willing to guess which routes will be dropped?