Australia. John Borghetti to Virgin.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning. 

Foxtrots – leading the industry in a dance.

June 23 2010


Australia. John Borghetti to Virgin.


OHN Borghetti, 54, replaced Brett Godfrey in May as CEO of Virgin Blue Holdings.

VBH is more than the airline Virgin Blue but, despite that ‘Virgin’ corporate name, none of the other airline operations pay for the Virgin franchise. That is a clever stretch of use of a franchise (‘clever’, if you are on VBH’s side, that is). Imagine – “Pacific Blue Airlines, a company in the Virgin Blue Holdings group”.

The most-recent, and blatantly-subliminal move (can subliminal also be blatant?), is the creation of V Australia. ‘V’ represents nothing, but ask its passengers and you can bet that most would respond that they are flying on ‘Virgin Australia’.

Borghetti was previously with Qantas. He was 2nd or 3rd in line to take over after Geoff Dixon left, but he was gazumped by johnny-come-lately Alan Joyce, brought in to start up Jetstar for Qantas. And when Jetstar was deemed a success, the Qantas CEO post was offered to Joyce – over Borghetti, who then quit the group.

Borghetti was a corporate man at Qantas, and filled his role competently, even if not dynamically. But he presided over the creation of a dysfunctional corporate at Qantas (can you ‘create’ dysfunction?).

During his time, and still, the Qantas group had a clutch of different types of airlines. They comprise: the full-fare airline (Qantas); an Australia-operating full-fare regional airline (Qantas Link); an Australia-operating steadily-adding-frills airline (Jetstar); an Asia-based part-frills badly-run airline (Jetstar Asia); and an Australia-based international lower-operating-cost airline taking over some routes from Qantas (Jetstar International). And added since Borghetti left one year ago is a no-frills NZ airline (Jetstar New Zealand).

Borghetti might have been relieved to exit from that mess – except that VBH seems to be trying to create a similar sort of mess. It has: the original, adding-frills Australia-operating airline (Virgin Blue); a full-fare international airline (V Australia); and a regional full-fare airline (Pacific Blue).

So although Borghetti might have the experience, does he have the skills?

Indeed, what skills are needed to run such a potpourri group?

With hindsight, I now see – in Qantas and one of its three different Jetstar operations – a brilliant businessplan for regular full-fare airlines, not just for Qantas. I don’t think Qantas was thinking of this when it started Jetstar, though (and may still not quite have realised its importance). If it did, why would it create three different types of Jetstar?

The crucial Jetstar is Jetstar International. And the brilliant idea is to use JI to replace Qantas on certain routes, and to operate flights to absorb some of the Qantas growth potential. It then becomes a lower-cost option for international expansion – without incurring the wrath of employees and higher costs of the main airline.

One airline in Europe is much in need of this ‘JI-plan’ – Alitalia. It too has a lower-cost (and brighter) subsidiary called Air One. Time will tell whether Alitalia will use AO in the same way that Qantas is now using JI.

Meanwhile, back at VBH, the group is not following the JI-plan that with its own bunch of airlines. V Australia is not a large full-fare airline (it is small airline with a divergent route network) – so VBH does not need a lower-cost replacement.

Indeed, you could say that VBH has a lower-cost operation and is now adding a higher-cost operation. That may not seem to make much sense, but that is now Borghetti’s task to make sense of it – and to solve the problems that VBH founding-CEO Godfrey has left him.

Borghetti is also joining at a tough time. VBH seat sales increased only about 3% in 2009, despite a number of new routes and the new V Australia. And 2010 has not started off well either – YTD seat sales up 2%.

The Fox


Travel people. Back- and for-awards.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning. 

Foxtrots – leading the industry in a dance.

June 21 2010


Travel people. Back- and for-awards.


S I have noted before, I do not support annual awards (unless I win one, of course). One reason is that most are awarded annually, and although there may be a deserved recipient one year, there is unlikely to be one every year.

Thus it is with Sol Kerzner, winner of the 2010 Hospitality Innovator Award, at Cornell University, no less. Has Kerzner won the award for what he has done, and not what he is doing? After all, his Kerzner International cannot be considered innovative – just straightforward luxury resorts and gambling resorts.

Plus, although he was once dynamic and innovative – with his Southern Sun Resorts (Cornell notes only Sun International, which came after SSR, and best known for its Sun City and Lost City resorts) – his current activities are hardly growing and hardly known.

Ask the travelling public what is ‘One & Only Resorts’. You would likely get a puzzled look not only because O&O is a misnomer (how can there be more than one ‘O&O’?) but because the company and its handful of resorts are not well known.

KI’s best-known are Atlantis, Paradise Island resort in the Bahamas and the new and outrageous Palm in Dubai.

I am not saying Kerzner’s products are not good, or even successful; just that he does not warrant such an award from such a respected body.

Cornell does not always make mistakes. At the same event – earlier this month – but not given so much prominence, is its (painfully-named) ‘Icon of the Industry Award’. The winner is…Charles Feeney, billed as an entrepreneur (Duty Free Shoppers) and philanthropist (Atlantic Philanthropies).

Surely Cornell knows the rest? It said Feeney founded DFS, but in fact he was only one of three founders; ‘DFS’ was the initials of those three, with Feeney the middle man.

More than that, though, DFS changed airport retailing, certainly in Asia and Hawaii. It brought smart retailing to airports – not only in shop layouts, pricing tactics, and such, but also in knowing its customers.

But perhaps Cornell does not know – and maybe Feeney has forgotten as he philanthropically spends his well-deserved millions – is that DFS customers were not difficult to understand.

They were Japanese travellers; I guess 75% of DFS revenue came from these in the first 10 years (and US$10bn?) of DFS operations – mainly in Hawaii and Hong Kong. And their purchases were uncomplicated – say, black label and dior and hermes.

So how about an award for now travel-shy Japanese?

The Fox


Airline capacity. First-half data.

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Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning. 

Foxtrots – leading the industry in a dance.

June 18 2010

Airline capacity. First-half data.


HE main first-half-2010 airseat patterns for the region* show a strong return to growth. Although this is to be compared with the depressed totals in 2009, three of the four main measures (top four in my Table 1), were growing faster than the 10-year average.

Perhaps surprisingly, the one that was not growing faster was low-fare intra-region – because this has been the sector growing fastest, although from a low, sometimes very-low, base.

Growth in air seats to-and-from the region is 6% compared with almost 50% faster for intra-region traffic. Over the decade, however, average annual growth has been 6% for both to-and-from and intra.

Within the four regions, the largest by far is Northeast Asia. Its capacity pattern was 4% to-and-from, compared with 8% intra-regional – but 41% low-fare IR, the fastest in the route patterns I track.

LFAs are steadily penetrating Northeast Asia, which means primarily China, Japan, Korea. LFA seat capacity this year is 14mn, compared with 23mn for Southeast Asia – although intra-NEA total capacity is 280mn compared with a much-smaller 89mn for intra-SEA.

Of course this indicates that LFA’s traffic potential in NEA is much greater than in SEA.

The other strong area for LFAs is Southwest Pacific, which means primarily Australia and New Zealand. Intra-regional traffic has been growing annually at 38% compared with an annual 3% for total traffic.

LFA seats appear to have grown substantially this decade, see Table 2. But definitions are a problem. For instance, I would not define Jetstar International as an LFA, and even have concerns (if definition terms) for its adding-frills domestic original, Jetstar Australia.


That said, OAG shows the South Asia with the highest share – having 102% of the non-LFA total. However, we believe this is caused primarily by mis-definitions. India’s Jet Airways and Kingfisher are often included in LFA totals, although they are not LFAs; they are just newer airlines. Many observers tend to categorise new airlines that offer lower fares as low-fare-airlines. I would put the LFA share in this region at around 20-25% of the non-LFA share (by deducting JA and K from LFAs and adding to non-LFAs.)

The two other strong areas for LFAs are intra-SW Pacific, growing from 3% of the non-LFA total in 2001 to 64% this year. SW-Pacific is boosted greatly by sizeable Jetstar and Virgin Blue, and domestic-Australia start-up Tiger.

And LFAs are also big in SEA – the heartland of the Air Asia group (Indonesia, Malaysia, Thailand; see upcoming report in July issue of Travel Business Analyst) as well as also-rans such as Jetstar Asia and Cebu Pacific.

*All data extracted from the June edition of the monthly OAG Facts. Data for Jan-Jun. Some calculations by Travel Business Analyst. For more information on this product – of which this report is but a tiny part – contact

Table 1

Seats to, from, and intra Asia Pacific, mn

  2010┼       2009┼ 2008┼ 2001┼
Region No Growth,% AAGR*,% Share╪,% Growth,% Growth,% No
To/from region 82 6.5 5.5 4.5 -1.6 11.7 51
  low-fare 3 9.9 na 0.2 29.1 130.6 none
Intra region 516 9.4 6.1 28.5 1.8 5.6 303
  low-fare 89 21.6 45.1 4.9 12.8 25.3 3.1
To/from NE Asia 73 4.4 3.7 4.0 -7.9 10.0 52
Intra NE Asia 280 8.2 5.8 15.5 6.9 3.0 169
  low-fare 14 40.8 40.4 0.8 53.2 6.5 0.7
To/from SE Asia 58 8.3 4.8 3.2 -4.6 7.7 38
Intra SE Asia 89 21.0 8.5 4.9 -1.5 6.4 43
  low-fare 28 22.6 38.6 1.5 15.7 23.6 1.5
To/from S Asia 34 9.6 9.3 1.9 3.0 18.4 15
Intra S Asia 45 6.7 10.4 2.5 -5.3 8.9 18
  low-fare 23 16.7 na 1.3 2.2 26.6 none
To/from SW Pacific 18 7.4 3.2 1.0 -0.1 5.7 13
Intra SW Pacific 47 3.1 2.9 2.6 -3.7 11.1 37
  low-fare 19 9.7 38.2 1.0 2.0 23.8 1.0

Notes: *Average annual growth rate, 2001-10. ┼Jan-Jun. ╪Of world. Source: Travel Business Analyst, OAG Facts;

Table 2

Low-fare-airline seats share of non-LFA, %

Region 2010┼ 2001┼
To/from region 4.2 na
Intra region 20.9 1.0
Intra NE Asia 5.3 0.4
Intra SE Asia 45.0 3.5
Intra S Asia 101.9 na
Intra SW Pacific 63.9 2.8

Notes/Source: As Table 1.

The Fox