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Virgin freezes recruitment and cuts capacity by 7.7%

written by Adam Thorn | March 13, 2020

Virgin Australia will not hire new staff and has increased capacity cuts to 7.7 per cent for the first half of the next financial year.

In the latest measure to mitigate the impact of the coronavirus crisis, the airline has also stopped bonuses, trimmed marketing spend and will reduce chairman and board director fees by 15 per cent.

Chief executive Paul Scurrah said the airline was less exposed to the impact of COVID-19 because domestic operations account for 88 per cent of passengers and 78 per cent of flight revenue.

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An artist's impression of a Virgin Australia Boeing 737-800 with the new split scimitar winglets. (Virgin Australia)
An artist’s impression of a Virgin Australia Boeing 737-800 with the new split scimitar winglets. (Virgin Australia)

Scurrah said, “The reductions in services will also mean reduced flying for our crew and we are committed to working with them through this period and providing a range of options.”

In a statement released to the press on Friday morning, Virgin made a raft of announcements, including:

  • Total capacity reduction to increase from 3 to 6 per cent in 2H20 and increase to 7.7 per cent in 1H21;
  • Domestic capacity reduction to increase from 3 to 5 per cent for 2H20 and increase to 6.2 per cent in 1H21;
  • International capacity reduction to increase from 4.8 per cent to 8 per cent in 2H20 and to 10.3 per cent in 1H21; and
  • Earnings guidance suspended due to uncertainty and the evolving nature of the COVID-19 situation.

From May, the Sydney-LA service will fly five times a week, rather than daily, while trans-Tasman flights will be cut by 6 per cent.

Flights from Auckland to Tonga and Auckland to the Cook Islands will stop on 1 May and 21 July, respectively.

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The group will also slash costs, which will include halting all “discretionary spend” on “non-critical” capital expenditure and freeze the use of consultants for the remainder of the financial year.

Scurrah talked up the airline’s domestic priorities as evidence the airline would ride out the coronavirus crisis.

He said, “We have already announced a number of measures to mitigate the impact from COVID-19, however the pace of the global spread and decline in demand has required us to implement further changes today to minimise the future financial impact.

“As a largely domestic airline, we are less exposed to the impact on international travel, however we remain disciplined in our focus on managing capacity in response to forward bookings and continuing to reduce costs across the business.

“It’s worth noting that domestic operations account for 88 per cent of our passengers and 78 per cent of our flight revenue.

“Pleasingly, our travel bookings to Western Australia and local leisure destinations such as the Gold Coast, Sunshine Coast, and Hamilton Island continue to be ahead of where they were at the same time last year. This demonstrates Australians are continuing to travel within our own backyard and support local tourism.

“These measures announced today are intended to soften the impact from COVID-19 and safeguard our company for the future.”

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6 Comments

  • Rickdan

    says:

    Not enough cuts, they must be in a world of pain.

    Stand by for much deeper cuts, they cant last long with this crisis, there shareholders (all 5 of them) are all other airlines and already in there own worlds of pain (2 on life support with the Chinese government) No chance they can fiscally support Virgin.

    Hope they can get to June 30, but dont hold your breath.

  • Rocket

    says:

    Just analyse these standard weasel words used by all companies…
    “ and we are committed to working with them through this period ”
    Why not just say we’ll work with them, what value does the word committed add. It’s like ‘real’ change.
    Is other change not real?
    Is he not committed to working with his staff at all other times?

  • Paul Sheehan

    says:

    Paul Scurrah says that Virgins domestic operations account for 88% of their passengers, but with international arrivals and departures generally being drastically reduced due to the COVID-19, that must surely reduce Virgins domestic passenger numbers as well. Many international passengers take domestic flights in Australia as well while they are in Australia, so I think it is a bit optimistic to suggest that Virgin is less exposed to the impact of international travel.

  • Craigy

    says:

    With the newly announced requirements for international arrivals, as Paul states, there must be a fall in domestic passengers as they have interline agreements with Singapore, Hawaiian, and Delta. I would expect further cuts to Virgin capacity in the domestic market. With Tigerair’s lower cost base, maybe one solution is to maintain the current fleet numbers and take over some of Virgin’s routes instead of progressing the fleet reduction to 8 aircraft.

    Likewise, Qantas could utilise the B712 and F100s on Qantas mainline routes if demand makes the use of B738 and A330’s uneconomical. Also there are opportunities for Jetstar with their lower cost base.

    An interesting comparison would be the cost per seat km between Qantas mainline and Jetstar, and Virgin and Tigerair on a route basis and average overall.

  • Dj Cavanagh

    says:

    Opportunity to punse! If there is a Tiger out there, now’s the time to strike. With nice purse one could really make a solid impact..
    I’d suggest diverse fleet able to adjust capacity. Look for a foothold into eastern Europe. 2nd coming?

  • Red Cee

    says:

    Does anyone know if the planned BNE to HND is still going ahead as planned later this month?

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