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.
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.
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.”