Virgin Australia (VA) has today announced plans to create what it says will be a stronger and more competitive business to ‘focus on its core strengths and re-establish itself as an iconic Australian airline’.
The Virgin Australia Group has announced a masterplan to create a stronger, more profitable and competitive business, building on its unique culture and securing approximately 6,000 jobs as it prepares to exit voluntary administration under the new ownership of Bain Capital.
In an announcement to the ASX, this morning, Virgin Australia Group CEO and Managing Director Paul Scurrah said that together with new owners, the plan will help to re-establish Virgin Australia as an iconic Australian airline.
There’s a lot in here, so we’ve broken it down for you into bite-sized chunks to make it easier to digest.
Here’s the key points of the plan
The fleet: The Group will move to an all-Boeing 737 fleet for domestic and short-haul operations which will see the removal of its ATR, Boeing 777, Airbus A330 and Tigerair Airbus A320 aircraft.
Regional and charter fleet will remain, while the company reviews options at Virgin Australia Regional Airlines (VARA), including different operating models to support continued regional and charter flying.
Moving in with Flight Centre Travel Group: As reported last week, Virgin Australia will move its corporate headquarters to 275 Grey Street in Brisbane’s Southbank, taking up five floors in September. This follows a consolidation of its corporate offices in Sydney.
The network: Flights to Los Angeles and Tokyo will continue to be suspended with the intention to recommence and grow long-haul flights when sufficient demand returns. Customers will continue to have access to international markets through the airline’s codeshare partners.
Domestically, Virgin Australia is currently operating a reduced network of services to 28 towns and cities across Australia and says it will continue to add destinations and frequencies in line with demand and to support the nation’s economic recovery from COVID-19.
“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.
Paul Scurrah, Virgin Australia Group CEO and Managing Director
No more Tigerair: The Tigerair brand will be discontinued due to insufficient customer demand to support two brands at this time.
Tigerair Australia’s Air Operator Certificate (AOC) and the resources necessary to support the AOC will be retained to support optionality to operate an ultra-low-cost carrier in the future when the domestic market can support it.
Not a low-cost carrier: Virgin Australia says it aims to be the best value carrier in the market, but not a low-cost carrier. It says it will offer exceptional experiences at great value, regardless of the purpose of travel.
The airline says it will serve business travellers, including corporates and customers travelling for a holiday and visiting loved ones, and maintain a two-class cabin offering.
Financial confidence: The Group say they will emerge from Voluntary Administration with a strong balance sheet, worthy of an investment-grade rating, providing resilience and future growth potential.
Backed by Bain Capital, with more than $AUD150 billion assets under management, Virgin Australia says they will have a strong balance sheet to withstand material future shocks to the industry.
Jobs: As a result of the changes, including the transition to a single Boeing 737 fleet for domestic and short-haul flying, it is expected approximately 3,000 jobs will be impacted, primarily across the operations functions, and corporate roles which directly support the operation.
VA says formal consultation with unions and employee groups has commenced, and all options including voluntary redundancy, redeployment, leave without pay and flexible work arrangements to be explored to retain as many jobs as possible.
The airline says that while devastating for their people, making these changes now will secure approximately 6,000 jobs once market demand recovers, with potential to increase to 8,000 jobs in the future.
Team members who remain stood down as the Group waits for domestic and international travel restrictions to ease, or are on Leave Without Pay, will continue to receive the JobKeeper payment until it expires in March.
Refunds and credits: All travel credits and Velocity Frequent Flyer points will be carried forward under Bain Capital’s ownership.
VA will provide customers with the value of their travel credits post-administration. To preserve value for customers with credits for bookings made prior to administration, booking dates will also be extended to 31 July 2022 for travel until 30 June 2023.
Customers and travel agents will be notified directly of any flight cancellations associated with the announcements made today. Tigerair Australia customers and those affected by any cancellations will be provided with a travel credit for use on Virgin Australia operated services.
VA says further information about the use of credits will be provided to customers in due course.
Speaking about the plan and immediate changes to VA’s business and people, Virgin Australia Group CEO and Managing Director Paul Scurrah said:
“To those that leave the business, I want to thank them for the role they’ve played in making this a great airline. They will be closely supported through our alumni program, have all their entitlements honoured and be provided with a two-year extension of employee travel benefits and early access to retiree and long service benefits.
“Our people have shown incredible resilience under tough circumstances. They are what set the Virgin Australia Group apart and make us so unique. We hope to welcome many of them back as we start to grow again in the future.”
Paul Scurrah, Virgin Australia Group CEO and Managing Director
“Virgin Australia has been a challenger in the Australian market for 20 years, and as a result of this plan and the investment of Bain Capital we are going to be in a much stronger position to continue that legacy.” He said.
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