Despite this week’s media kerfuffle about Virgin Blue’s maintenance
problems, the issue confronting Richard Branson’s airline is
not safety – it’s management.
In our 27 February sealed section we asked:

*What of those nasty rumours about Virgin Blue’s fleet. How is it that
one of the world’s youngest fleets has a number of planes lying idle in
the hangar, unable to fly?

*Why have aviation authorities banned Virgin from flying over water on the Melbourne-Perth sector?

*Is it really true that while Richard Branson is a marketing genius, he
couldn’t run a reliable airline in the long-term to save himself?

It’s taken a couple of weeks, but finally the mainstream media has
picked up on our report and, with typical subtlety, has turned
the story into a gigantic beat up about airline safety.

Check out the grilling ABC radio’s Stephen Long gave Virgin’s Brett Godfrey on AM yesterday: http://www.abc.net.au/am/content/2004/s1062731.htm

This kind of reporting has given airline unions fodder to flex their
muscles. Today’s SMH gives the Australian Licensed Aircraft Engineers
Association plenty of space to carp on about a supposed lack of
resources for their members:

‘Virgin rejects safety criticism’
http://www.smh.com.au/articles/2004/03/10/1078594434774.html

Stand by for a “safety” based pay claim from every airline union and their dog.

But the issue is not safety – it’s management. And it goes to the point
we raised two weeks ago: Richard Branson has a legacy of starting up
airlines in a blaze of glory, only to run into turbulence down the
track. Witness the rocky path of Virgin Atlantic, Branson’s long-haul
venture, now 49% owned by Singapore Airlines.

Airlines are not record stores. They are volatile mix of people and
planes operating in a dynamic industry requiring long-term strategic
management.

And that’s where Chris Corrigan’s Patrick Corp, brought in two years
ago as a VB partner, was meant to help out the mercurial Branson in the
nuts and bolts of running an airline.

While VB has captured nearly a third of the domestic market with the demise of Ansett, there have been some serious problems.

Virgin has perfectly good aircraft sitting in hangars unable to be
used, and the airline has voluntarily suspended its licence for ETOPS
(extended-range twin engine operations), preventing it from flying more
than an hour outside an airfield. Not good for productivity.

News Ltd yesterday picked up our revelation that planes were being kept
in hangars – and even had the temerity to label it an ‘exclusive’ in
its online edition:
http://www.theaustralian.news.com.au/common/story_page/0,5744,8926015%255E12377,00.html

And the Thin Review’s Tansy Harcourt recycled Crikey’s story in today’s
paper, claiming “as reported in the AFR on Monday” VB “already has one
new plane on the ground that it is unable to register because of the
problem.”

And the problem is maintenance: sources tell Crikey that Virgin has
done a poor job getting the right senior people to run its maintenance
division, resulting in farcical errors like key parts simply
disappearing from maintenance logs.

Poor management is reflected in the faulty computer system change-over
which resulted in data “glitches” Brett Godfrey blamed for Virgin’s
problems yesterday.

“We had, and I think the words that were used even by others such as
CASA were ‘glitches’. We transferred our data from an older type system
to a newer type system, a new system which cost us somewhere in excess
of US$3 million,” he told AM.

That’s $3 million worth of trouble. In recent months, the airline has
been forced to cannibalise its existing fleet to provide spare parts.

It’s the kind of stuff-up that Ansett found itself encountering as it entered its death spiral.

But Virgin is not compromising safety. It’s compromising its
profitability. The airline’s troubles are being fanned by
rumor-mongering within the industry – probably from Qantas staff,
hinted at by Godfrey yesterday.

Qantas has its own challenges: using Jetstar to capture a share of
the discount market from Virgin, while not destroying the
profitable business travel margins enjoyed by the bloated and
uncompetitive flying kangaroo brand.

Crikey even received an anonymous email claiming Virgin might be grounded by authorities within six months.

This is as unlikley as F1 Minardi boss Paul Stoddart’s OzAir, with its
proposed motley fleet of BAE 146’s flying from Essendon airport, ever
getting off the ground as a long-term domestic competitor.

Peter Fray

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