Virgin Australia Holdings Ltd will cut a third of its workforce and scale back its fleet under the ownership of Bain Capital as the buyout firm attempts to resurrect the airline during the industry’s worst-ever crisis.
Under a plan announced yesterday, 3,000 of the airline’s 9,000 jobs will go and long-haul international flights will remain suspended. After crumbling in April under A$6.8bn ($4.9bn) in borrowings, Virgin Australia will also get rid of all its long-distance Boeing Co 777 and Airbus SE A330 jets and fly only Boeing 737s on short-haul routes.
The proposals are the first glimpse of Bain’s plan to revive Virgin Australia in a market that shows little sign of recovery. Corporate aviation casualties are mounting up – including Virgin Atlantic Airways Ltd this week – as carriers from Thailand to the Americas collapse or seek bankruptcy protection.
“I applaud the courage of Bain to save an airline in the middle of a pandemic,” the airline’s chief executive officer Paul Scurrah said yesterday.
A full recovery for the industry is unlikely before 2024, a year later than previously anticipated, the International Air Transport Association has warned. And even that might be optimistic, according to Scurrah.
“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,” Scurrah said.
A debt-burdened Virgin Australia buckled as the coronavirus pandemic brought business to a halt. Administrators fast-tracked an auction before the airline’s cash ran dry and agreed to sell it to Bain in June.
Since then, Melbourne has retreated into full lockdown after a flareup in Covid-19 infections, and plans for a virus-free air corridor with New Zealand have been put on ice.
Bain’s scaled back goals for Virgin Australia contrast with the airline’s previous and ultimately fateful ambition to compete with Qantas Airways Ltd as a full-service carrier.
That vision destroyed Virgin Australia’s balance sheet and ultimately led to a management shakeup. As the new CEO, Scurrah had barely started to cut costs, simplify operations and trim debt before he was overwhelmed by the pandemic.
The airline will ditch its budget Tiger Australia brand and ensure travel credits are provided to customers on flights that were canceled due to the pandemic.
Scurrah said the airline hopes to employ up to 8,000 staff as the market recovers.
Qantas said in June it would cut 6,000 jobs and ground about 100 planes as it laid out plans to raise an additional A$1.9bn to survive the downturn.
Virgin Australia’s creditors, who include employees, are yet to find out how much money they will recoup. They’re due to vote on the proposed sale to Bain on Aug 26.
The airline started as a low-cost domestic carrier in 2000. When it went under, Virgin Australia operated 144 aircraft. It had pushed back delivery of Boeing Co 737 Max jets to July 2021, when it expected to receive the first of the 48 it had on order.
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