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Two Virgins hit headlines as Covid-19 buffets industry

August 6, 2020 Headline News No Comments Email Email

The Virgin name is riding high in the headlines, with Virgin Australia unveiling plans for a “stronger, more profitable and competitive” airline (shedding about a third of its workforce and axing Tigerair in the process) while in the northern hemisphere, Virgin Atlantic dropped a bombshell of its own.

In a move unrelated to the Australian airline, Virgin Atlantic declared itself bankrupt under chapter 15 of the US bankruptcy code (which affords some protection from creditors while a company seeks to trade itself out of difficulties). In a court filing in New York cited by the Guardian, Virgin said it had negotiated a deal with stakeholders “for a consensual recapitalisation” that would remove debt from its balance sheet and “immediately position it for sustainable long-term growth”.

Airlines have entered Chapter 11 before and emerged to attain success.

In Australia meanwhile, Virgin Australia is set to shed about 3000 jobs under new owners Bain Capital.

Key points of the Virgin Australia move, as outlined by the ABC yesterday:

  • Virgin Australia says it aims to operate with about 6000 staff once travel returns to more normal levels;
  • The airline says that means about 3000 staff will be “impacted”, although it hopes it may later be able to re-employ up to 2000 workers;
  • Customers with cancelled flights will receive travel credits to use for new bookings by 31 July 2022; Velocity frequent flyer points will be carried forward under the new owners.

Virgin Australia group announced its new plan would:

  • Focus on delivering exceptional experiences at great value with Virgin Australia’s core domestic and short-haul international business
  • Provide customers with the value of travel credits post administration with validity dates extended for bookings made prior to administration
  • Reset Virgin Australia to meet lower global and Australian demand, including:
    – Reduction in cost base to meet sector uncertainty and Covid-19 market conditions
    – Securing approximately 6000 jobs when the market recovers with 3000 roles impacted
    – Simplified all-Boeing 737 mainline fleet and the retention of the regional and charter fleet, but removing ATR, Boeing 777, Airbus A330 and Tigerair Airbus A320 aircraft types.
    – Long-haul international flying important part of plan but suspended until global travel market recovers
    – Tigerair Australia brand discontinued with Air Operator Certificate (AOC) retained to provide option for ultra-low-cost operations when market recovers.
    – Continued commitment to regional and charter flying.

The Australian Federation of Travel Agents (AFTA) welcomed Virgin Australia’s conditional credit policy, saying it “will see all credits and forward bookings honoured”.

The Australian Airports Association said the announcement of further job losses and cuts to long-haul international routes by Virgin Australia highlighted the need for the Government to develop a recovery strategy for the aviation industry “as the economy adapts to Covid-19”.

AFTA welcomed Virgin’s commitment to supporting regional Australia, pointing out that Virgin had advised the Australian Stock Exchange that customers would be provided with the value of travel credits post administration, with validity dates extended for bookings made prior to administration.

“AFTA and travel agents have been proactively pushing on behalf of customers and consumers on the critical importance of Virgin Australia honouring bookings and credits in place when the airline was placed into administration,” AFTA chief executive Darren Rudd said.

“This included securing commitments from the shortlisted bidders which AFTA was successful in achieving.

“We appreciate and acknowledge the commitment of the new Virgin Australia team to doing the right thing by consumers. I had a very constructive meeting with Virgin Australia Group CEO and MD Paul Scurrah and Chief Commercial Officer John MacLeod in Brisbane recently and AFTA looks forward to continuing to work collaboratively with Virgin.

“Competition in Australia’s skies is critically important from a trade and consumer perspective and for our economy.”

Australian Airports Association (AAA) chief executive James Goodwin said: “Our thoughts are with those affected by Virgin Australia’s announcement. There are few industries hit harder by the pandemic than aviation and this is another blow for the sector.

Goodwin continued: “There is deep concern amongst the airport sector at the flow-on impact of the significant job losses and service reductions outlined by Virgin Australia.

“This highlights the need for the Government to develop an aviation industry recovery strategy as the economy adapts to Covid-19.

“Throughout the extraordinary Covid-19 crisis, airports have been committed to staying open to assist people to return home from overseas, for essential workers to continue doing their jobs and keep our global freight airbridges operating.

“There has been a 98% reduction in domestic and international air passenger movements since the pandemic began, yet the fixed costs to operate airports haven’t changed, with runways still needing to be open and safety and security screening maintained.

“Airports are concerned Virgin Australia’s withdrawal from long-haul international routes will push back the safe reopening of international air corridors while the laying up of its short-haul regional fleet may further reduce the connectivity of regional Australia to our major cities.

“It is important that governments maintain a strong focus on the challenges of the aviation sector and the flow-on benefits the sector has to the rest of the economy.

“Airports are calling for support for installation of Government-mandated domestic and international security screening equipment as well as rebates for international screening charges.

“Assistance for regional airports is also needed as they continue to operate essential services for their communities, but many are not eligible for government support programs.”

Edited by Peter Needham

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