On Friday, Virgin Atlantic announced the completion of its £1.2bn ($1.57bn) private-only solvent recapitalization plan, which includes its holiday business. This restructuring framework has the approval of courts in both the UK and the US and allows the company to embark on its road to COVID-19 recovery. So what can we expect to see from Virgin Atlantic in the coming months?
“Together, we have achieved what many thought impossible and that is down to the efforts and sacrifices of so many across the Company. The completion of the private-only, solvent recapitalisation of Virgin Atlantic removes much of the uncertainty we faced and represents a major step forward in our fight for survival.” -Shai Weiss, CEO, Virgin Atlantic
What can we expect to see as the plan is implemented?
Now that the Restructuring Plan has been given the green light by courts in both the UK and the US, Virgin Atlantic has announced the following ‘changes at scale, to ensure it emerges from this crisis.’
We can expect to see a smaller airline with fewer employees, as outlined in its press release:
- A planned reduction of 1,150 jobs across all functions. Virgin Atlantic will carry this out in coordination with unions Unite and BALPA as part of a 45-day company-wide consultation, which begins today.
- The airline will also introduce a voluntary furlough scheme for 600 crew. This will come into effect when the UK government’s coronavirus job retention scheme concludes at the end of October. The furlough scheme will not be put into effect should the government extend the job retention program.
“After the sacrifices so many of our people have made, further reducing the number of people we employ is heart-breaking but essential for survival. I truly hope that as demand returns, we will see many members of our team returning to us. The unique spirit of our people, the passion we have for our customers and each other, and the drive to do things better has been tested but not broken.” -Shai Weiss, CEO, Virgin Atlantic
Skeleton transatlantic services through remainder of 2020
Virgin Atlantic notes that it has already restarted skeleton passenger operations with flights to New York JFK, Los Angeles, Hong Kong, Barbados, Shanghai, Miami, and Delhi. Service to Tel Aviv will restart today. “While performance has been encouraging, it is imperative that every sector the airline operates is cash positive,” the airline emphasizes. Unfortunately, transatlantic flying represents 70% of the airline’s network, and thus far, it has been greatly hindered by the presence of travel restrictions and quarantine policies.
The carrier says it is planning a scenario in which transatlantic flying from the UK does not extend beyond current skeleton operations until the beginning of 2021. In this scenario, capacity operated across its network in the fourth quarter of 2020 would be 25% of 2019 levels. It goes on to say that revenues in 2021 could be only 50% of 2019 levels.
The airline’s CEO concludes the public statement by saying that there will be a recovery. However, the timing and speed of this recovery remain uncertain.
For now, we know that Virgin Atlantic will have to make some deep and painful cuts to its employees while keeping its operations at a fraction of what it operated in the year prior.
What do you think about this plan put forward by Virgin Atlantic? Will it be enough to allow it to survive this crisis? Let us know in the comments.