Jayne Hrdlicka, CEO of Virgin Australia, believes it is vital to keep the world accessible through great value fares. Interview by Graham Newton
How difficult has it been to survive the crisis?
There’s no denying the toll COVID-19 has had on the aviation industry, and it has been no easier for Virgin Australia. Before the revenue disruption of COVID-19, Virgin Australia was over-burdened with debt and a bloated cost structure. When borders closed internationally and domestically, Virgin Australia had no choice but to enter Voluntary Administration. This was a devastating moment for both our suppliers and our people.
We have not wasted this opportunity, however, to quickly renew under new ownership, restructure our cost base, and completely rebuild our commercial function. In a little under 18 months, we were able to remove over $300 million in costs while rebuilding our revenue generation capability.
This period was incredibly difficult for our amazing people. But their passion and commitment to rebuilding a hugely successful Virgin Australia means we have made some remarkable progress in the last two years. By fully standing back up all Virgin Australia employees, growing our fleet size over 50%, hiring an additional 3,000 people, launching a new loyalty program for small and medium-sized business fliers, re-launching short-haul international flying, adding new world class international partners, and committing to net-zero emissions by 2050, we have made some major changes to our business and aren’t done yet.
We are now much more agile, adaptable and prepared for the world of possibilities than ever before.
Was it easier to manage the restructuring of the airline because operations were so limited?
There is no doubt that it has been beneficial to have a period of relative quiet to rebuild our business model. With strategic new owners, we were able to begin investing in the future and investing in our transformation on our first day under new ownership. It would have been easy for Bain Capital to say please wait for the revenue before significant investments in IT infrastructure, people, and organizational transformation. They did the opposite, and instead asked us how fast we could deliver and what we needed to make that happen. We are continually grateful for their strategic orientation about their first aviation investment.
What is your strategy for the airline?
Our ambition is to be the most loved airline in Australia with a winning team that attracts the very best, generates extraordinary loyalty from our guests and delivers strong financial returns.
Through the administration process we reset the perimeter of our business, removing activity that was structurally or strategically disadvantaged. We then renewed focus on our core domestic business through a simplified fleet and fundamental transformation of our commercial and operations model. Since exiting administration, we have taken a further $400 million in cost out of the airline with significant transformation yet to come. Virgin Australia’s comprehensive transformation enables us to now deliver exceptional travel experiences at great value.
Underpinning our strategy is our laser focus on 33% domestic market share, and we have grown our 737 fleet by over 50% in the last 12 months from 58 aircraft to 88 aircraft to support this.
In terms of our guest offering, it is focused on great value, choice, and delivery with the unmistakable Virgin flair. This includes great pricing combined with our global airline partnerships, rewards through Velocity Frequent Flyer, great travel experiences in our lounges and on board our flights, and partnerships with some of Australia’s most recognised brands. This is largely delivered by our crew who live and breathe our values and our unique Virgin Flair and enable us to remain Australia’s most loved airline.
How will you improve the company culture?
The strength of Virgin Australia has and always will lie with our people. They are the reason we have been able to recover so strongly over the past two years. They have stayed resilient, demonstrating both loyalty and commitment in times of uncertainty, been incredibly flexible, and worked passionately every day to make a difference for our guests and our airline.
The passion for our airline runs deep through all our team members and this has helped us all get through periods of very little flying, to periods now where we are seeing soaring demand.
We nurture and uphold a workplace culture which emphasizes an authentic, fun loving, hardworking, and irreverent challenger nature. Our employees feel assured bringing their true selves to work every day and we’re grateful for it.
We are delighted that with borders open and lockdowns a thing of the past, we have been able to re-hire hundreds of people who left the business during the pandemic and are hiring hundreds more to support our growth. Despite an increasingly competitive recruitment market, we continue to attract amazing people to the airline.
What more could the Australian Government have done to support the travel industry and what still needs to happen to help airlines recover?
We are grateful for the support we received as an industry through the worst of COVID-19. It helped keep vital infrastructure ready to fly and support both the community and the economy rebuild post lockdowns.
Going forward, the Australian Government has released an Aviation Recovery Framework, which among its six priorities looks at enhancing and modernizing regulatory settings, including airports regulation, to help the entire industry thrive, and building a sustainable pipeline of workforce skills for the future. In addition, there is a Strategic Aviation Advisory Forum that will engage with industry and provide feedback to government on the recovery and future issues.
It’s important these initiatives are continued regardless of the election outcome. We would also hope to see a funding program to assist in the development of sustainable aviation fuels (SAF) in Australia.
Is the digital transformation of the industry technology for technology’s sake or is it the only way forward?
It is absolutely the only way forward and the shift in consumer behavior post-pandemic has only hastened the need for change in our industry.
The transformation of industry technology is critical to meet customer expectations in how to shop, book, manage, and enjoy their travel experience—on the ground and in the air. The best online retailers have lifted the bar, and our customers expect simplicity, consistency, speed, and ease when they interact with us.
The use of data science and more flexible integration of technology platforms will help make this possible. There are also many significant opportunities to use data more dynamically to drive significant real-time operational performance improvements.
We are heavily investing in technology and the digital experience as part of our wider transformation strategy to best position ourselves to serve the next-generation customer and to continue managing down our costs. As part of that, we have prioritized upgrades to internal and external digital interfaces and to commercial and operational tools and platforms.
Can airlines afford to pursue sustainability in the current climate, and do you look at green initiatives from a business or environmentalist point of view?
We’ve all got an obligation to do the very best job we can protecting the environment and protecting our futures.
We’re very realistic with the challenges associated with getting to net zero by 2050. Though SAF is a key piece of the puzzle, it is not the only piece. Our focus is on the elements of our emissions profile that are within our control, and to work closely across the industry to encourage investment in SAF. Cracking the commercial viability of SAF is the key to our industry goals. Australia is behind other scale markets, so we have work to do as an industry to deliver against our ambition.
Virgin Australia announced its commitment to Net Zero Emissions by 2050 in November 2021. We are actively building out our wider sustainability strategy, which includes modernizing our fleet, continuing our success with operational efficiencies, working to further reduce all ground emissions, waste management, carbon offsetting programs, and the use of alternative fuels.
How do we encourage the production of sustainable aviation fuels to scale up?
In Australia, there are economically viable solutions in the works. The industry will find answers to the dilemmas we face and work out a way to make SAF commercial.
What does diversity bring to the industry and are airlines doing enough to encourage it?
At Virgin Australia, we encourage and embrace diversity in all its forms. We do this not just because it’s the right thing to do, but because we fundamentally believe it is economically rewarding for any company to reflect diversity. As an Australian airline, we operate in one of the most culturally diverse nations in the world and we believe in an inclusive, diverse, and equitable workforce that is representative of the communities in which we live, work and fly.
We recognize that an important part of this is meaningful action toward reconciliation with Aboriginal and Torres Strait Islander peoples and communities.
In March, we launched Virgin Australia’s first Reconciliation Action Plan (RAP), which was our commitment to cultural recognition and reconciliation through a formalized plan to ensure Aboriginal and Torres Strait Islander peoples have the same opportunities to work, travel, and do business with Virgin Australia as other Australians.
As part of our RAP, our priority is building career opportunities for our Aboriginal and Torres Strait Islander team members and ensuring they feel supported and valued for their contribution to the Group. For over a decade now, Virgin Australia has proudly supported significant partnerships and sponsorships to create opportunities and improve outcomes for Aboriginal and Torres Strait Islander peoples in Australia, and we recognize the importance of continuing this journey.