Virgin Australia has announced it will cut 3,000 jobs and axe the Tigerair brand – making the low-cost airline the country’s first major airline casualty of the COVID-19 pandemic.
In an early morning announcement to the ASX, the business also said it will continue to fly international routes, will operate as a hybrid and not a low-cost carrier and will also continue to offer domestic lounges and business-class flying.
Minutes later, ‘winning’ bidder Bain then confirmed to Australian Aviation that it plans to retain chief executive Paul Scurrah.
The dramatic changes, though, are seemingly dependent on Bain Capital’s preferred bid being rubber-stamped by creditors at a crunch meeting later this month. The airline’s bondholders have already said they will put forward a rival offer.
The bulk of the 3,000 likely job losses will come from those working in operation functions and corporate roles. The airline confirmed that consultation with unions will start today and that voluntary redundancy and redeployment will be explored to try to retain as many jobs as possible.
The news comes after the larger group announced in late March it would make 1,000 of its 8,000 stood down employees permanently redundant, including all 220 Tigerair pilots.
“Our intention is to secure approximately 6,000 jobs when the market recovers with aspirations for up to 8,000 in the future,” said Scurrah on Wednesday. “To those that leave the business, I want to thank them for the role they’ve played in making this a great airline.”
The business also admitted the Tigerair brand would be discontinued – despite repeated reassurances post-administration that it would be retained.
In March, for instance, Scurrah said he planned to return Tigerair to the skies “as soon as it’s viable to do so”. Since the Virgin Group began restarting services in the last few weeks, only Virgin Australia has been accepting bookings.
Moving forward, the new-look airline will operate as a so-called hybrid, running a mixture of services but likely with less of a focus on international routes than before.
“Virgin Australia aims to be the best value carrier in the market, not a low-cost carrier,” said the statement.
It added that long-haul international flying would remain an “important part of the plan but suspended until the global travel market recovers”.
The new network will operate with a slimmed-down fleet, operating a 737 mainline fleet for domestic services but removing ATR, Boeing 777, Airbus A330 and Tigerair Airbus A320s. Its regional and charter fleet will also be maintained.
While new services will be added as the market recovers from the pandemic, the business will for now continue to suspend flights to Los Angeles and Tokyo. It also confirmed it will operate a “two-calls cabin offering” and maintain many of its lounges, despite some reports to the contrary.
“Demand for domestic and short-haul international travel is likely to take at least three years to return to pre-COVID-19 levels, with the real chance it could be longer, which means as a business we must make changes to ensure the Virgin Australia Group is successful in this new world,” said Scurrah.
“Even when we do see a return to pre-COVID-19 levels of travel, successful airlines will be influenced by demand and look very different than the way they did previously, requiring long-term capital, a lower cost base and be more focused on providing exceptional experiences through a combination of great people and world-class technologies.
“Our initial focus will be on investing in the core Virgin Australia domestic and short-haul international operation alongside our 10-million-member strong Velocity Frequent Flyer program, continuing to offer an extensive network of destinations, a domestic lounge network and value for money for customers.
“Bain Capital recognises the importance of Virgin Australia’s loyal customers, and that’s why they will be provided the value of their travel credits post administration with validity significantly extended to ensure they have plenty of opportunity to book tickets to their favourite destinations.”
However, much of this depends on creditors formally approving Bain’s bid later this month, which has already been accepted by its administrator.
Deloitte has also already insisted it won’t accept a rival bid from bondholders – despite a Federal Court judge confirming they can put their alternative proposal to a vote.
Deloitte made the declaration in a letter sent in July to creditors, which also confirmed that ‘winning’ bidder Bain has already pumped $125 million into the business to keep it trading.
Those groups will find out exactly how much money they will receive from Bain’s proposal on 19 August 2020, before the second creditors meeting and vote to rubber-stamp the deal on 26 August.
Bain has already guaranteed employee entitlements, including potential redundancy payouts, will be covered in full, as will customers’ travel credits and refunds.
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