Virgin Blue to shake up management team

Australia's second-largest airline Virgin Blue plans to shake up its management structure as it seeks to double its share of the domestic business-class market and take on dominant player Qantas Airways.

New chief executive John Borghetti said yesterday he planned to integrate Virgin Blue's long-haul offshoot V Australia into the main company under a new management structure.

He also unveiled plans to increase his senior executive team from six to eight under changes outlined in a memo to staff obtained by Reuters.

The changes by Borghetti, who was once in the running for the top job at Qantas, were part of a wider plan to increase competion with its rival in business travel and reposition Virgin Blue away from its roots as a budget airline.

Borghetti was also looking at axing the carrier's premium economy class to put in full business-class seating as well as update the airline's cabins and uniforms, two airline sources said. He also wanted to double his airline's share of the business-class market to 20 percent, the sources added.

"The new CEO has a clear strategy of restructuring and repositioning Virgin Blue in the domestic context - however it will take at least six months to determine whether this approach is likely to be successful," Macquarie analyst Russell Shaw said in a recent note to clients.

Under the changes outlined in the memo, management of Virgin Blue and V Australia's operations would come under the same executive. Previously, both the airlines were managed separately.

The airline's commercial chief Liz Savage would also oversee network management under the changes, while V Australia would be integrated into the airline's operations division under Andrew David, the memo said.

"It will increase accountability, remove duplication and create greater integration across our domestic and international network," Borhgetti said in the memo.

Qantas' former head of government and international relations Jane McKeon, who was poached this week, would be in charge of government relations under the changes.

A new executive position headed by Martin Daley was also created to focus on products and guest services as the airline seeks to step up its image in the business-class market.

Borghetti, who spearheaded a revamp of Qantas' first and business-class lounges in his previous role is known to have a passion for fast cars and good suits.

As well as poaching McKeon, Qantas' head of domestic pricing and yield Will Owens had also left to work for Virgin Blue, three airline sources said.

Competition is fierce in Australia's small domestic aviation market which is dominated by Qantas and its low-cost offshoot Jetstar which together have a 65 percent market share.

Singapore-listed budget carrier Tiger Airways has also stirred up the local aviation market with the introduction of cut-price fares aimed at the country's leisure travel market.

However, some analysts warned Borghetti faced an uphill battle mustering sufficient resources to take on Qantas.

Figures out Wednesday showed Qantas passenger numbers rose 5.6 percent in May compared to a year ago. Passenger numbers were up 7.6 percent for the financial year so far.

Virgin Blue's passenger numbers rose 4.6 percent across its domestic and international operations in May and 1.5 percent for the financial year to date.

Virgin Blue shares closed 3.3 percent weaker at 29.5 cents, while Qantas fell 1.4 percent.

British billionaire Richard Branson's Virgin Group owns a 25 percent stake in Virgin Blue.

- Reuters