Here's Johnny!

So perhaps the least surprising announcement in the Australian travel industry came earlier this week when Virgin Blue introduced former Qantas Executive GM John Borghetti as the new boss at Virgin. I think pretty much everyone who’s in the business here knew that as soon as Borghetti’s 12 months of non-compete time were up he’d likely pop up at another carrier, and even more likely at Virgin since Brett Godfrey announced his departure last year.

What will be very, very interesting to watch as Borghetti takes over the reins is whether he can deliver on his ultimate boss’ (Sir Richard Branson) statement that Australia’s number two airline will need to “go after the business market in a big way.” Borghetti was a big driving force behind Qantas’ business products, including the launch of their new business class early in the past decade as well as overhauling the QF flagship lounges – all critical to attracting the high-yielding corporate traveller dollar.

Virgin has done a nice job in recent years of slowly but surely adding on more features to woo business travellers, from upgraded lounges to increased flights amongst top city pairs to special seating to a greatly enhanced Velocity rewards program. These are the “fab four” of what attracts the business traveller: frequency, points, lounges and perks.

If we focused on just the fab four factors, then the good money would likely be on Qantas to continue to enjoy dominance in the business market as although Virgin has indeed greatly improved their products over the past few years, by and large they still are a bit behind Qantas in terms of frequency (although they are very close, especially on SYD-MEL) loyalty (QFF is still the biggest loyalty program in Australia),and lounges (newly refurbished domestic lounges and let’s not even try to compare the Qantas International First Class lounge to anyone else.)

With respect to perks I’ve not been able to experience Virgin Blue’s approach to upgrades, special seating requests, better meals, etc. as I’ve just not flown them enough to have an opinion, so for the sake of this discussion I’ll just call that even.

However, where things get interesting is thanks to the new frugality brought on by the GFC, and that is with fares. DJ has enjoyed strong growth since taking over from Ansett as the antipodean #2 carrier and much of that is due to their aggressive fare discounting in the leisure sector attracting cost-conscious holiday makers. Well guess what – CFO’s and corporate travel managers are the new “holiday makers” in that they too are now seeking out the best deals, the cheapest seats, and any airlines who will give that to them.

I’m afraid that like the original Fab Four, the aforementioned fab four of business travel are about to be broken up and go on solo careers as many companies aren’t concerned about who gives out the most points anymore or who has Cararra marble in their lounge bathrooms (guess which carrier that distinction belongs to?)

So, which approach will Borghetti use to woo Sir Richard’s expected corporate travellers – the QF method of providing “addictive” travel perks like swish lounges and Platinum cards, or will he go after the bottom-line minded travel buyers and CFO’s as after all, they’re the ones really holding the purse strings? Only time will tell (Borghetti apparently starts in May) but I’m sure it will be an interesting matchup to watch.

EXTRA SHOT FOR THE DAY : “AUSTRALIAN GOVERNMENT STIMULATES THE CORPORATE TRAVEL INDUSTRY”

Sorry if the headline is misleading, because I’m sure billions of dollars are not about to be put into the corporate travel industry. But about $500 million or so of government "money" is actually out there for the taking...

Talk is starting to heat up around the impending (apparently within the next 3-4 weeks) announcements by the Australia Federal Government around who wins and who loses across their $500M+ annual expenditure in travel. Airlines, hoteliers, travel agencies and technology providers are all on pins, needles and lobbyists’ hotlines waiting to hear how the Qantas dual stronghold (on air and travel management services) will be reallocated. Note that I said “how” rather than “whether” as I will be extremely surprised and not a little dismayed if nothing changes out of this process.

What’s great about this whole thing is that everyone and their mother thinks they’re going to get a slice of this enormous pie. Even Etihad is wading into the fray, as the Middle-Eastern airline’s CEO James Hogan was recently quoted as saying the six-year old carrier is fully into the bidding process. Given Qantas often complains about Mid-East carriers enjoying government subsidisation that QF hasn’t had for years, it would be slightly ironic if any of them got a slice of the Australian Government’s spend. As a taxpayer, however, I’m more than happy to have the Government fly on more cost-effective suppliers - assuming Etihad or any other carrier will indeed be cost-effective of course....