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Virgin Australia prunes capacity and routes to restore profit

May 20, 2019 Headline News No Comments Email Email

Only three months after Virgin Australia reported its best six-monthly financial performance in over a decade, the airline has announced it is pruning capacity and routes in the face of slow demand and rising costs.

The Sydney Morning Herald and Melbourne’s Age reported on Friday Virgin Australia’s new chief executive, Paul Scurrah, has confirmed a retraction of 1.5% in the airline’s capacity in May and June.

Routes affected include services to and from Perth, Canberra, along with some regional flights to Kalgoorlie (WA), Ballina (NSW) and Proserpine (QLD).

Scurrah has ordered a review of “every single part” of Virgin’s business to return the airline to profitability and growth, the papers said.

On Friday, Virgin revealed its expected full-year underlying earnings would be AUD 100 million below last year’s result, meaning a loss of at least AUD 35.6 in fiscal 2019.

“Fuel and foreign exchange headwinds” are said to be behind the problem.

Virgin is under fierce competitive pressure. Qantas revealed earlier this month that the Qantas overall market share of corporate travel revenue had reached its highest level in three years, indicating that Virgin Australia’s longstanding effort to wrest corporate business from its larger rival is still very much an uphill task.

Virgin Australia A330-200

Uncertainty about the election outcome, evident during in the lead-up to Saturday’s vote, may also have dampened airline bookings.

In another development, Virgin Australia’s second-in-command, chief executive of Tigerair Australia, Rob Sharp, has departed. His role as group executive will reportedly be split into two new positions: chief operations officer and chief commercial officer.

Written by Peter Needham

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