by Rod Douglas 

Ever stuck your hand in a beehive and stirred? Well, last month, when I sent Brett at Virgin the infamous, ‘I’ve had a gutful... of your deceitful airline’ email I wondered what would happen.

First thing that occured was that a call came in from Matt Dixon, the ever polite Guest Services Manager for the Virgin group. Naturally, he did what every good customer service person does and pushed out the deadline for engagement by a week. Gives everybody a chance to cool down you understand. Investigation is, of course the excuse…and an investigation should always be done. Usually it’s a couple of phone calls to ask what happened and then to placate the staff.

The next step is to placate the aggrieved customer (guest if you’re flying Virgin, although I rarely feel a ‘guest’). Into the fray charges Brett with a short response to my email. That at least proves that he cares. And I have to say that it was a tough week to be caring what one lied to guest has to say about your airline.

There is no question that poor old Brett would be suffering some sleepless nights over the tidal wave of the GEC (global economic crisis for those who have missed every piece of media in the country for, oh, about six months) that is sweeping the entire airline industry before it. The very next week he was on a roadshow trying to convince the institutional investors that Virgin Blue was doing everything they could to deal with it and trying to sell a $101.4 million dollar loss as ‘not a bad outcome’ on the basis that it actually an ‘underlying net profit before tax of $60 million’.

Now Brett, all I can say is it’s lucky that the world has got used to trillion dollar bailouts and there are a whole lot of other corporations that are taking enormous restructuring cost, because the market would have given you a pasting any other time. Upon the announcement of a $214.1 million reversal, the market actually marked up Virgin Blue which was in line with market movement before the stock price plummeted about 40% to a record low of 15 cents.

Interestingly, for anyone with a big appetite for risk you could buy the whole of the Virgin Blue group (market cap $184 million) for the cost of a couple of superb Gulfstream G550’s plus a G150 for the weekend, both of which are currently gleaming outside on the ramp at Avalon.

I bet a lot of shareholders would simply like to access the $526 million in cash currently sitting on the balance sheet. While sentiment in the market is pretty horrible right now, the level of mark down would seem to indicate that the market expects that there will much ‘blood on the wall’ as a result of the V Australia initiative, especially as Virgin Blue will no longer be able to capitalise development costs and the real profit and loss impact will become obvious.

Some people might see a long bow being drawn between the share price in the midst of a ‘once in two generation’ correction and customer service. Those with a long enough view of strategy and the genuine creation of value, never do. Short termism is a disease and it starts with the dilution of strategy.

But back to Matt, the world’s most amiable guest service manager. He was unflappable. And persistent. Almost otherworldly persistent, in a yet to wake up ‘Generation Y’ world. I am difficult to get on the phone. I run from meeting to meeting and spend endless days in strategy retreats. Well, he tried and tried and tried. When finally, after weeks, he caught up with me it was on the run down to gate to jump on yet another Virgin flight from Melbourne to Cooly.

He was polite yet non-committal. He claimed a review of service from the Sydney Virgin Airport manager. He didn’t admit they were wrong - probably because of some advice from a lawyer somewhere. They really are the devil when it comes to customer service those lawyers. He was a very nice man was Matt. He even offered me a couple of upgrades to Premium economy. Tried to upgrade me at the gate even. It did show a bit of a flaw that the Guest Services Manager couldn’t make that happen because the manifest paperwork was complete. I’d eat my hat if Virgin were running their jets so close to the edge that a five row movement of one guest would upset the COG.

I got on the flight feeling heard but unsatisfied. So I wrote to Brett again, copied Matt. I asked for an upgrade for each of the five times I was misled plus one as punitive damage. Matt said no. Big mistake I’d say. My next email pointed out the stupidity of saying no to a remediation that cost no cash.

Some of my regular readers might remember my column from last year where I took exception to the completely unfocused strategy that I felt Virgin Blue was pursuing. From a simple model of one brand, one aircraft, one class to three aircraft, many classes, four brands and, ‘why was it we started this thing again?’, that’s biting right now. V Australia has just launched with the first of its big beautiful Boeing 777 sitting outside on the ramp right now. Could there be a worse time to start an international long haul airline than right now? Could there be a worse time to be competing against the world’s best and most profitable airline on one of their premium profit-earning routes. I don’t think so. I suspect that the $120 odd million that has been spent getting V Australia into the air would make shareholders much happier if it was sitting in the bank.

Furthermore, I suspect that right now management could do without the distraction of trying to make ‘V’ fly in times like this. I was chatting to one of the 777 captains who bought Digeree Blue into the airshow yesterday. He’s been on the ground for six months and when I asked how he was finding it his response was simple. “It’s a start up. Lots of things they haven’t got…but great people.”

Great people. Unfortunately that’s only half the equation to building great culture. Great, empowered people is the other half. Once culture is right then it’s time to make sure that the strategy passes the idiot test. Can I run this past an intelligent idiot (i.e. someone who knows nothing about your business) and have them make sense of it. Virgin Blue isn’t passing that test. Finally, it’s a question of value. Will my people and strategy drive an increase in the value of the business? Clearly the market is completely underwhelmed.

That said, lots of great businesses start in recessions because ‘necessity is the mother of invention.’

Finally Matt got back to me. He apologised profusely and agreed to provide me with the half dozen upgrades I’d asked for. In fact, the next four sectors I’d flown after he said no, I’d already been upgraded upon. Matt took responsibility for it but I suspect that it wasn’t Matt’s mistake.

On the positive, I have to say that premium economy is starting to finally look like a product. Free food, free entertainment, some acknowledgement of premium payment and some cabin managers who understand that if you’re going to wpay more, you are probably going to need to be engaged more positively.

It’s probably fair to ask the question as to whether in a utilitarian culture like Virgin you can build a two speed culture which puts people into a conflict between absolutely efficiency and the time and skills needed to provide high service. For me the jury is out.

In the good news department comes the sensational service provided by Bianca on DJ 990 to Jai, my 11 year old, when he flew down unaccompanied to Melbourne for the Airshow on Thursday. She was absolutely delightful. Fortunately Jai, who has his heart set on fast jets, is a mature, friendly boy who is usually a delight for anyone but mum and dad. She worked her Virgin magic and had him gushing about how good Virgin actually is.

In the spirit of fairness I flew Jetstar a couple of weeks ago. It used to be that there was enough traffic that I could easily avoid any Qantas company flights but since the advent of the ‘GEC’ that’s changed. I have to say, in support of Virgin’s future success, the experience continues to be desperately underwhelming. Jetstar’s model is thrift without friendliness. It’s a bus service.

It quickly reminds you that while I might be a smidge critical of Virgin’s strategy confusion, I really like having ‘the lounge’ (which is spacious and empty while all the welded-on corporates experience ‘cattle sale day’ like crowding in Qantas Club) and I really like that Virgin is allocating seats based on usage priority. It’s a bloody long time since I sat in a middle seat on Virgin.

How Jetstar manages to win customer service awards is beyond me. They must look for people who have never flown before to vote for them. On the other hand you can’t argue with their profitability.

In the midst of all the drama I was walking into ‘the lounge’ in Sydney one Thursday afternoon when the door slid open and out burst Richard Branson, closely followed by Brett.  “G’day Richard,” says I, having met him a couple of times. He said ‘hi’ and started to stop. I waved him on. I was very tempted to chew his ear about my issues with his beloved airline, but I wouldn’t have wanted to embarrass Brett. They were off to the V Australia launch party.

It reminded me of all those wonderful old sayings that my nana used. ‘Always wear clean undies in case of accidents’, ‘never tell a lie unless you’ve got a better memory that everyone else’, ‘do to others as you would have done to yourself’. It’s old wisdom that always works. You never know when you’ll get caught out. If Brett hadn’t of bothered to reply to my email I would have had no hesitation in door-stopping Richard.

Qantas produced an A380 for the weekend of the Avalon Airshow. It provided a fairly bland handling display. In Qantas-like form, the aircraft wasn’t open for inspection. Very Qantas-like: arrogant and separate. Contrast that to the effort that V Australia made to get its 777 seen and experienced. The crew, from flight attendants through to pilots, were delighted and proud to share their new real estate with whomever was interested.

I have to say that I was impressed. It’s well laid out, business class is as good as any I’ve flown, the bar adds a little space and the premium economy will be an easy buy for a business owner on a budget while realising that how they arrive will determine how much work they get done. Economy is clearly cattle class, but good sized screens and reasonable pitch means it still rates well.

V Australia 1 vs Qantas 0

Qantas missed a significant opportunity. In the long term the staid are always overrun by the innovative.

So how do I feel about my good friends at Virgin Blue after the dust has settled? Well I’m still bolted on. They still try hard, work smarter and live in challenger land. They’re not too arrogant and they tried hard to resolve my issue. In the end they listened.

I hope they understand why I was so aggravated. It’s only the people who care who will ever tell you what their problems are. In most cases it almost doesn’t matter what it costs to resolve the issues you hear about, because you can be assured that those who don’t tell you about the problems are out telling everyone else about how bad you are. It’s said that delighted people will tell four people about good you are while those you’ve disappointed with tell 20.

I’m ever hopeful that Virgin Blue will get it right. I have a sense that the market might lose its patience with the current leadership and it might take a change at the top to see someone with the vision to understand just how good the bones are and the experience to translate it into excellence before success is assured.

Brett has done a remarkable job to take a start-up with US$10 million in capital and turn it into a $2.5 billion revenue business with a third of the domestic airline market in Australia. Whether he can make the transition into running a mature business during a significant economic correction only time and the market will tell.