Cheaper business class fares are good news for business travellers, but Virgin Australia CEO John Borghetti says that the current price war between Virgin Australia and Qantas is good for his own business too.
Speaking on ABC TV’s Inside Business programme this weekend, Borghetti takes the credit for a claimed drop of “around 25 percent” in business class fares after his newly-invigorated airline went after the premium travel market.
“For more than 10 years whilst economy fares and promotional fares at the leisure end have dropped significantly – in fact on some routes it’s halved because of the competition at the low end – there was no competition at the top end since Ansett stopped flying” John Borghetti told Inside Business host Alan Kohler.
“So we deliberately entered that market and we know that the fares were very high and we could bring competition at lower fares with better service, and that's exactly what we've done.”
However, Borghetti ducked the issue of how profitable Virgin’s business class cabin can be at those lower fares.
“I think you have got to look at the profitability of the business as a whole, and people forget that, you know, there is the halo effect of the product and the brand that brings profitability as well.”
There’s less question on the impact of partnerships with Air New Zealand, Etihad, Singapore Airlines and Delta.
“In terms of on carriage onto our domestic business, since we formed this alliance … the amount of money that we are getting on our domestic network has more than doubled. In fact it's almost trebled.”
Borghetti also reports that Virgin Australia is well ahead of where he expected it to be at this stage of his three-year ‘Game Change’ plan.
“We set ourselves a target of achieving certain goals within three years. We’ve just entered the third year and we've almost, almost, achieved all of them. So, I'm pretty pleased with the progress. But the issue with this is that you don't sit on your laurels.”
You can watch the full interview at Inside Business.