Virgin Australia Could Cut Jobs And Routes In Wake Of Huge Loss

Virgin Australia yesterday announced an AUD$315 million loss for the 2018/19 financial year. It was the airline’s seventh consecutive year of losses. Cumulative losses to date are now AUD$1.9 billion. Yesterday’s loss was attributed to high fuel costs, foreign exchange costs, subdued market conditions and legacy costs incurred as the airline transitioned from a low-cost carrier to a full-service airline.

virgin-australia-loss-cuts
Virgin Australia has just announced an AUD$315 million loss. Photo: Andrew Curran / Simple Flying.

Yesterday’s announcement by Virgin Australia’s CEO, Paul Scurrah, was not a surprise. Observers and analysts consider Virgin Australia to be a “good” airline burdened by a complex ownership structure, high operating costs, and a lack of strategic focus.

Yesterday’s loss is an improvement on the 2017/18 loss of AUD$681 million.

What’s the CEO Saying?

Paul Scurrah, who has only held the top at Virgin Australia for a short time, has a formidable reputation and a background in transport logistics. After taking up the top in March 2019, he embarked on a cost-cutting program. At the time, Mr. Scurrah said nothing was off the table. 

Featured Video:

The Sydney Morning Herald is reporting that there will be a review into where the airline flies to, how often, and in what type of aircraft.

In a statement, Mr. Scurrah said;

“We are focused on getting the business into profit as soon as possible, which will take some further tough decisions. We do expect that we will make network changes on the back of that analysis. That could be a withdrawal from a market or a reduction in frequency or a combination of both.”

Yesterday’s loss might bring some of this tough decision making forward.

750 jobs to be cut

Virgin Australia announced yesterday that it would retrench 750 employees or about 7% of its workforce. The majority of the jobs would be cut from Virgin Australia’s Brisbane head office and represent about one-third of all office roles. It is expected to save AUD$75 million per annum.

virgin-australia-loss-cuts
The bulk of the jobs are expected to go from Virgin Australia’s Brisbane head office. Photo: Commander Keane via Wikimedia Commons.

The Australian Broadcasting Commission is also reporting on Virgin’s back-office simplification program which will merge the discrete corporate and operational roles of Virgin’s domestic, regional and TigerAir operations

Paul Scurrah says he is acutely aware of the impact of job losses on people. He also says it is necessary.

Routes to be cut

Virgin Australia’s Hong Kong flights only started two years ago and have never made a profit. Despite having excellent hard and soft products on the route, the flights have never succeeded in the face of competition from Qantas and Cathay Pacific.

Virgin Australia recently entered into a codeshare agreement with Virgin Atlantic in an effort to improve poor passenger loads. Despite this, there has been speculation that the recent problems in Hong Kong would give Virgin Australia the perfect excuse to “suspend” the flights.

It has not yet done so but the money is on Paul Scurrah taking the axe to Hong Kong sooner rather than later.

virgin-australia-loss-cuts
Virgin Australia’s excellent but little used A330 service to Hong Kong looks set to get the axe. Photo: Bidgee via Wikimedia Commons.

Many observers of Virgin Australia question the wisdom of the airline’s international ambitions and the need for it to fly internationally. Some argue it is far better for Virgin Australia to stick to its knitting and offer a comprehensive domestic service.

And taking those A330’s off the Hong Kong route and redeploying them back onto the transcontinental route would prove hugely popular with frequent flyers.

Virgin Australia’s domestic routes are likely to see some capacity cuts. On many routes, Virgin Australia already offers less capacity and frequency than competitors Jetstar and Qantas. More cuts may further undermine Virgin Australia’s market share.

Australia’s second airline is in a tough spot. It has lots of fans and offers a good service. But the continual losses cannot be sustained. Paul Scurrah is a tough operator. He faces some challenges but if anyone can point Virgin Australia towards the black, it’ll be someone like him.

Might not be so easy a job though.

What do you think Paul Scurrah will do next? Post a comment and let us know.

6
Leave a Reply

3 Comment threads
3 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
5 Comment authors
newest oldest most voted
Phil

Virgin is better off focusing solely on competing with Qantas on the Domestic market, keep its LA flights and perhaps cutting its Hong Kong flights and redeploying the A330 to Auckland to compete with Air New Zealand. I’d also expand Tigerair to replace Virgin on some flights to NZ, Bali and the Pacific Islands. To further expand their international reach they should join Skyteam. Now that would be a winner for VA! Imagine all the options for flying internationally.

Dan

I’d just shut TigerAir down and re-absorb into mainline. Also “unbundle” economy fares again, ala Virgin Blue, and use the “Seat Only” fare to attract the low yield/budget travellers that would’ve taken TigerAir otherwise. As for international, axe everything except NZ (AKL/CHC/WLG) and LAX. New Zealand (AKL/CHC and BNE-WLG) are only retained in partnership with DL/SQ and Los Angeles in conjunction with Delta with the 777s. HKG definitely has to be axed as that owner HNA is also in debt. The A330s should be returned to SYD/MEL-PER and on the “Golden Triangle” SYD-MEL/SYD-BNE inbetween TransCons and selected Peak Time flights.… Read more »

Phillip

Well Virgin can’t just rely on its “virtual alliance” anymore. It hasn’t got the same reach that Qantas does being a oneworld member. Virgin could simply join Skyteam as a lite member similar to the arrangement Fiji Airways has with oneworld where they are in the “oneworld connect”. It’s also something Aer Lingus and Alaska Airlines have been considering too rather than being full members of Oneworld.

Andrew

I’d expect that 750 job cuts will reduce VA’s expenditure by slightly more than AUD $75 per year as suggested in this article.

Ken

My direct flight from Sydney to Launceston on early June 2019 was cancelled, probably due to low load factor. I was eventually arrived at Launceston more than 5 hours later than original schedule, after a 4 hours layover in Melbourne.