Crack team pilots airline to favourable skies

The first signs of the future close relationship between Skywest Airlines and Virgin Blue (now Virgin Australia) began in 2007 when Skywest joined Virgin’s loyalty program.

Much stronger commercial relationships developed between the parties from 2011 to 2013 following that tie-up with Virgin’s Velocity Rewards program. These were the result of a new direction for Virgin Australia, with founding chief executive Brett Godfrey replaced in 2010 by John Borghetti, the highly respected former senior Qantas executive with 36 years’ experience in the Australian airline industry.

Mr Borghetti’s vision was bold: take the Virgin culture upmarket with business class and all its trappings. Also in his sights were a regional expansion and a much more robust push into the fly-in, fly-out charter market in Western Australia.

First came the deal whereby Skywest would operate a small fleet of Virgin Australia twin engine ATR 72 turbo prop aircraft, initially used on NSW and Queensland regional routes to take on Qantas. The first aircraft were delivered in August 2011.

The original plan had been to grow this nationally, however, the relationship with Skywest went in another direction with the December 2011 announcement of a corporate alliance covering Velocity Frequent Flyer, Virgin airport lounges and a joint sales agreement in respect of charter and revenue passenger transport (RPT) services for corporate customers.

Then, in April 2012, Virgin Australia invested $8 million in Skywest to help expand the existing partnership; this equated to a 10 per cent stake in the WA-based airline.

But that was only the precursor to the main event.

In October of that year – when Virgin Australia Holdings announced its acquisition of Skywest Airlines – Skywest positioned itself against QantasLink and other charter operators in WA’s mining and resources FIFO market.

The acquisition of Skywest was completed in April 2013, and shortly afterwards the Skywest brand was discontinued for the new airline called Virgin Australia Regional Airlines (VARA).

With the buyout, Virgin Australia appointed Merrin McArthur as group executive of the new entity.

Within 12 months, Ms McArthur had VARA back in profit and, over the next five years, grew charter revenue by 30 per cent while the fleet increased by 20 per cent.

All this took place amid an organisational restructure and cost efficiency program, while migrating the airline to the Virgin Australia reservation platform.

Part of that revamp was an assessment of the airline’s WA government-licensed routes. In October 2013, the Perth-Learmonth service operated by Fokker 100 was withdrawn, followed by a reduction of Fokker 50 services to Albany and Esperance.

In September 2015, the airline did not bid to renew the WA government licence for the Perth-Derby, Perth-Albany and Perth-Esperance routes.

Perth Airport Terminal 1, home of VARA. Photo: Sandie West.

In early 2013, Perth Airport opened its new Terminal 2 (T2), a small building to the south-west of the pre-existent international Terminal 1 (T1).

T2 became the passenger terminal for all then-Skywest/VARA flights, both charter and RPT. It wasn’t until November 2015, after several years of delays, that Perth Airport finally opened the Virgin Australia T1 domestic pier, ensuring Virgin had a showcase terminal way ahead of anything else at the airport.

The T1 pier and lounge were opened in spectacular fashion for staff and Virgin Australia and VARA clients, as well as an array of VIPs including then deputy premier and tourism minister Kim Hames.

In March 2018, Ms McArthur was appointed to run the Virgin Group’s low-cost airline, Tigerair, and Mark Davey, then head of VARA’s flight operations, was appointed executive general manager.

More changes were in the wind, with Mr Borghetti retiring in May 2019 and replaced by Paul Scurrah, who set about trimming the sails.

Storm clouds gathered just 10 months later when the aviation industry was devastated by COVID in March 2020.

With virtually no government support, Virgin Australia slipped into administration. Mr Scurrah vowed the airline would return to operations “leaner, stronger and fitter”.

Initially the airline stood down its entire workforce, but then signed a $165 million deal with the federal government to underwrite a minimum domestic network, which led to some staff returning and dozens of regional flights being resumed.

At the time, Virgin founder Richard Branson lamented the lack of government support, which contrasted with other countries’ efforts to support their airlines.

He even released a video to say the airline was not giving up.

“In most countries, federal governments have stepped in, in this unprecedented crisis for aviation, to help their airlines. Sadly, that has not happened in Australia,” Mr Branson said.

“I want to assure all of you, and our competitor, that we are determined to see Virgin Australia back up and running soon. We will work with Virgin Australia’s administrators and management team, with investors and with government to make this happen and create a stronger business, ready to provide even more value to customers, competition to the market, stimulus to the economy, and as many jobs as possible for our wonderful people.”

By July, US Equity giant Bain Capital emerged as the new owner of Virgin Australia and VARA, having paid $3.5 billion.

The new boss of Virgin Australia, Jayne Hrdlicka, was quick to allay fears that the airline may walk away from VARA. However, she said there was a lot of work to be done.

“We have to have a cost base that is competitive and we have to respond to market circumstances,” Ms Hrdlicka said at the time.

All through the massive upheaval, the Virgin and VARA staff maintained their customer focus, evidenced by the airline’s cabin crew being named global rating agency AirlineRatings.com’s ‘best cabin crew’ right through the pandemic years.

Nathan Miller took the role of VARA executive GM in 2022. Photo: Sandie West

The initial agenda for Virgin Australia and VARA involved rebuilding a crack management team. First to touch down was David Marr, Woolworths’ chief operating officer, who joined Virgin Australia as its chief financial officer and is now the chief development officer.

The airline has also attracted Alistair Hartley, director of strategy at International Airlines Group (British Airways), to take up the position of chief transformation officer, while ex-Qantas executive Paul Jones arrived in June 2021 to take up the role of chief customer and digital officer.

Another win was securing ex-Jetstar Japan chief executive officer Nick Rohrlach to head the Velocity frequent flyer program.

“This is a tough team to beat and each new member is a world-class leader with a proven track record and deep experience in aviation or consumer-focused businesses,” Ms Hrdlicka said at the time.

“These people deeply understand our market.”

A year later, Virgin Australia pulled off a major coup in luring Network Aviation (QantasLink) boss Nathan Miller to take the reins at VARA, as Mr Davey wanted to return to Sydney.

Those moves paid big dividends, with the Virgin Australia group returning to profitability in 2023 reporting a statutory net profit after tax of $129 million.

With restructuring complete and profits in the bank, VARA’s radar is blue skies with more than $100 billion in resources projects on the horizon in WA.

However, as always, challenges remain with intense competition for the FIFO market.