Newly installed Virgin Australia CEO Jayne Hrdlicka fronted an Australian Government Senate Inquiry on Friday to talk about the Australian aviation industry’s future post-COVID-19. Ms Hrdlicka thanked both Federal and State Governments for the assistance they’ve lent Virgin Australia and the airline industry throughout COVID-19. But she also took the opportunity to fight for a continuation of some form of government assistance.
JobKeeper keeps Virgin Australia employees working and connected
Somewhat similar to CARES Act payroll funding in the United States, Australia’s JobKeeper scheme helps underwrite payroll expenses for Australian businesses, including Virgin Australia. During Virgin Australia’s sale and restructuring last year, the workforce was downsized to around 6,000 employees. Of that number, roughly half are presently working. But JobKeeper is allowing all 6000 employees to remain connected to and employed by the airline. The Virgin Australia boss told the Senate Inquiry;
“It has been critical for our business and for our thousands of employees who have been stood down in varying numbers throughout the pandemic.
“JobKeeper has meant that we have been able to keep the family together and retain thousands and thousands of skilled jobs that would otherwise not have been possible and to protect the integrity and resilience of our operations in an environment where the pandemic and border closures have caused demand to be highly variable, with no ability to plan and predict what tomorrow will bring.”
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Jobkeeper is winding up
The problem for Virgin Australia and Qantas (who also has thousands of workers out on JobKeeper) is that the Australian Government is winding down the scheme. From a peak of AU$1,500 per employee a fortnight in mid-2020, payment levels and eligibility criteria are tightening, with the program is due to wrap up within months.
“Based on what we know today, there should be no expectation JobKeeper will extend beyond the end of March,” said Australia’s Treasurer, Josh Frydenburg in a TV interview on Sunday.
While many industries are bouncing back from a tough 2020, the airlines see themselves as a special case. Like the broader tourism sector, their fortunes are closely tied to border restrictions and travel bans.
Uncertainty and inconsistency causes problems
Virgin Australia ended its international flying early last year. Like Qantas, its domestic operations are continually hampered by snap internal border closures. Six weeks ago, Queensland closed its borders to most of New South Wales. That saw Qantas cancel over 1,500 flights to Queensland in January and forego revenue of around AU$200 million. At Virgin Australia, Jayne Hrdlicka had hoped its domestic flying levels would run at 60% of pre-COVID levels in January.
“The recent outbreaks and the state border closures meant that we were down far less than 40%,” the CEO told the Senate Inquiry. The day before Ms Hrdlicka’s appearance, Queensland announced it was re-opening its borders to New South Wales.
“Yesterday’s announcements to begin border openings with New South Wales caused sales to double in a day.”
While Virgin Australia welcomes that, the inconsistency and lack of a national framework regarding border openings and closures are making life very tough at the airline.
“You cannot imagine the complexity involved in running an airline generally, but during these periods it is exceptionally difficult. This is often a week-to-week proposition, and the rules and restrictions are often unclear and are constantly changing,” Ms Hrdlicka said.
Jayne Hrdlicka calls for some form of financial assistance
While accepting JobKeeper payments may end, the Virgin Australia CEO called on the Australian Government to extend some form of support in order to retain the airline’s workforce.
“Without a way to keep these critical employees connected, it is not financially viable for us as a business and them as people as they seek to manage their own living expenses. The aviation industry risks being materially delayed in its recovery and forced to downsize while demand is depressed and then rehire and retrain when it ramps up.”
But as the Australian Treasurer indicated on the weekend, unless there is a material change in Australia’s economic fortunes, Australia’s airline industry and its employees may be left to go it alone by the end of March.
What do you think? Should the Australian Government extend the JobKeeper program or offer some form of support to assist the aviation industry? Post a comment and let us know.