Virgin Australia’s share price has stabilised after dipping below 10 cents on Monday.
Stocks made a slight recovery to 12 cents on Thursday morning and have avoided crashing further despite an escalation in the coronavirus crisis.
The news came after credit agency Standard & Poor’s downgraded Virgin Australia’s outlook to negative.
Last week, Australian Aviation reported that the wider group recorded a $97 million half-year loss and announced its intention to significantly cut the Tigerair fleet.
S&P said in a note last week, “We revised the outlook to negative based on our expectation that restrictions on inbound tourism from Chinese nationals will cut Virgin Australia’s earnings for fiscal 2020.”
Virgin responded, “S&P’s updated outlook for the business reflects their view that the industry will continue to experience challenging conditions over the next six months due to the coronavirus.
“Virgin Australia maintains a strong cash position in excess of $1 billion, and our recent financial results last week showed an increase in revenue and passenger numbers.
“Any speculation about the future of the business is untrue and misleading.”
After last week’s disappointing results, Virgin Australia Group announced it would dramatically reduce its fleet by cutting seven A320s from its Tigerair brand by October 2020.
It also cut five “unprofitable” Tigerair routes from 27 April: Sydney to Adelaide, Cairns and Coffs Harbour; Melbourne to Coffs Harbour; and Hobart to the Gold Coast.
Chief executive Paul Scurrah said, “Today, we’ve made some important fleet and network changes that will help us improve our financial performance and respond to market conditions.
“There’s no doubt we are operating in a tough market, and we need to make sure our capacity deployment is disciplined to ensure our routes are profitable for our business.”
This week’s bad stock market performance represents an enormous fall from a high of $2.19 in February 2007.