Virgin Australia flights are put into an almost 3-month halt as the novel coronavirus ravages the global economy. Down by 6.4 per cent in share price, Virgin Australia decided to suspend all international travels by the end of March.
The airline’s drastic decision is to suspend all flights from March 30 to June 14. It may result in grounding 150 aircraft and the jobs of its 30,000 employees. The company even confirmed that surplus staff would have to choose between taking unpaid or paid leave.
The airline company also slashed domestic flights by half, grounding 53 planes for months.
From today until the 29th, Virgin Australia flights will have a reduced schedule to accommodate Australians returning from abroad and tourists to return to their country of origin. Virgin Australia managing director and CEO, Paul Scurrah said the group would work closely with the government to have those travels prioritised.
Nonetheless, Scurrah guaranteed that the company is “well-positioned” in this time of crisis. The Morrison government granted Virgin Australia $750 million in assistance package as travel bans weigh down the company.
About the response package, Scurrah said it is early to tell if it will be enough for the company to survive or not.
He discussed with the labour union regarding the impact this shutdown will have on their 10,500 workforces. He promised the company would strive to avoid redundancies through advancing leave with pay, redeployment, and accrued leave.
Yet Scurrah maintained that job losses would still be inevitable. He expressed empathy towards his workforce, saying that the hardest hit would be them. It follows after the airline announced in August a plan to reduce 750 head and corporate office roles in an attempt to regain its footing after losing $349 million last year.
He further expressed his dismay on how travel bans were hurting the global aviation sector, and what the aftermath would be for them.
Neil Hansford, Strategic Aviation Solutions chairman, predicts the Virgin could not survive the coronavirus crisis despite receiving a chunk from the government stimulus. He said the response package might bring little relief by waiving fees for major airline carriers, but it does not guarantee loans, which may cover the majority of losses.
Furthermore, Hansford added that the waived fees were variable expenses, and consist little of the overall airline budget as 80 per cent of it consists of fixed costs. He stated the workforce were invariable expenses, and redundancies were expensive.
Hansford further emphasised that Qantas, unlike Virgin Australia, owned the majority of its fleet and thus spending little on lease costs.
Besides, 90 per cent of Virgin’s shareholders were in deep trouble already.
The major shareholders of Virgin Australia are Hainan and Nanshan Groups (19.82% and 19.98% respectively), Singapore Airlines (20.09%), and the Etihad Airways (20.94%), mostly non-Australian companies. The Virgin Group only owns 10.42 per cent of the entire company.
For this reason, Hansford thinks it would be strange for the government to subsidise a company not owned by an Australian. It would be cheaper to pay benefits to Australian workers, than giving benefits and subsidies to foreign-owned companies, he emphasised.
To reduce losses after the suspension of Virgin Australia flights was announced, the company executives are willing to give up their performance bonuses. They will also get a 15 per cent reduction of the director and chairman fees.
On the other hand, Virgin announced that it would be setting up a “dedicated customer care hub” to answer queries and address travel changes.
The company added that guests with existing or new flight bookings, whether domestic or international, will have to change their schedules to a later date or change their destinations. No other fees will incur. If a guest wishes to cancel a flight, they will receive a travel credit instead.
Passengers who booked international Virgin Australia flights within the shutdown period must expect an email within the next two weeks. Travel agencies, however, will have to contact guests who booked flights through them.
Guests are advised not to contact Virgin Australia unless they are scheduled within the next 24-hours or in need of immediate travel assistance.
On Tuesday, Jetstar and Qantas announced a 90 per cent cut in their international capacity, as well as a 60 per cent cut in domestic capacity until the end of May.