Virgin effectively shuts domestic til June

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bcworld

bcworld

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For all those who have been worried regarding Virgin layoffs they have announced 80% of staff stood down. 125 aircraft grounded and tiger suspended.
 
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newsroom.virginaustralia.com

Virgin Australia Group revised domestic schedule

The Virgin Australia Group has confirmed a revised domestic schedule following the Group’s decision to extend domestic capacity reductions from 50 per cent to 90 per cent, including the suspe
newsroom.virginaustralia.com newsroom.virginaustralia.com

The Virgin Australia Group has confirmed a revised domestic schedule following the Group’s decision to extend domestic capacity reductions from 50 per cent to 90 per cent, including the suspension to Tigerair Australia domestic services effective immediately.

The Group will continue to operate near daily services to 17 Australian destinations for the purpose of transporting essential services, critical freight and logistics. The Group will temporarily suspend services to 19 Australian destinations from 29 March to 14 June 2020.

Virgin Australia will temporarily suspend services to the following destinations between 29 March and 14 June 2020:
• Albury
• Alice Springs
• Ayers Rock (Uluru)
• Ballina Byron
• Coffs Harbour
• Cloncurry
• Darwin
• Emerald
• Harvey Bay
• Hamilton Island
• Harvey Bay
• Mount Isa
• Launceston
• Mildura
• Sunshine Coast (Maroochydore)
• Newcastle
• Whitsunday Coast (Proserpine)
• Port Macquarie*
• Tamworth

Tigerair Australia will temporarily suspend all services effective immediately.

Support for guests
Virgin Australia guests who are booked to travel between now and 30 June 2020 are encouraged to visit the Virgin Australia customer care hub at virginaustralia.com to request a travel credit online or obtain more information about their options.

Virgin Australia and Tigerair Australia guests who are booked to travel between now and 31 March 2020 are being provided flexibility to change their flight to a Virgin Australia service departing on or before 27 March with change fees and fare difference waived. This can be done via our Guest Contact Centres or at the airport, subject to availability.

All other Tigerair Australia guests will be able to obtain a Virgin Australia travel credit.
*Virgin Australia continues to codeshare on Brisbane-Port Macquarie as well as routes between Brisbane and Bundaberg, and Gladstone operated by Alliance Airlines.
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A little nugget in the ASX release gives an indication of what the long term impacts are.

As a matter of priority, and to streamline and safeguard the Group's domestic and short-haul international businesses through COVID-19, the company will commence consultation on a proposal to close its New Zealand cabin crew and pilot base, and its Tigerair Australia Melbourne pilot base.
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Hard to see how Tiger makes it back in the skies if I'm honest. Probably shouldn't.

Thoughts very much with those stood down today and sincerely hope that they find some temporary employment in the mean time.

Really have everything crossed that VA make it through this incredibly difficult time. Can't wait for the next time I can get on a VA aircraft to go home. If I can do that when this is all over, I'll fly business and the crew will be getting the biggest box of chocolates I can legally carry on board!
 
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Must...Fly! said:
Hard to see how Tiger makes it back in the skies if I'm honest. Probably shouldn't.

Thoughts very much with those stood down today and sincerely hope that they find some temporary employment in the mean time.

Really have everything crossed that VA make it through this incredibly difficult time. Can't wait for the next time I can get on a VA aircraft to go home. If I can do that when this is all over, I'll fly business and the crew will be getting the biggest box of chocolates I can legally carry on board!
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Agree on the sentiment about Tiger unless VA have a very convincing business case for the Tiger model. I'm not opposed to a sub-brand as under good conditions it should allow VA to use the sub to make money on routes that wouldn't be profitable for the mainline brand. QAN did a really good job of this with JS to ensure it minimized any cannibalism of main profits.. and VA never did get to use Tiger in the same way (perhaps because it didn't create and integrate it the same way..)

I would also put money into VA (operations) the moment I can do so and would ensure chocolate for front desk checkin and ground staff.. I just don't know when that is at the moment.

Sadly I don't live near the airport - perhaps I can organize for Australia post or Woolies to deliver directly.. hmm..
 
"
Key points:
- Group domestic capacity reduction of 90 per cent and temporary grounding of 125 aircraft.
- 10 per cent domestic capacity retained for transportation of essential services, critical freight and logistics.
- Suspension of Tigerair Australia flying effective immediately.
- Approximately 80 per cent of workforce to be temporarily stood down.
- COVID-19 impacts to cost base has prompted a consolidation of our domestic and short-haul international
businesses and put a pause on some supplier agreements.

25 March 2020: The Virgin Australia Group (ASX:VAH) today extended domestic capacity reductions from 50 per cent to 90 per cent, including the suspension of Tigerair Australia domestic services effective immediately.
With state border closures escalating across Australia, the Group has needed to take further action that will see the suspension of most of its domestic flying from midnight Friday 27 March AEDT until 14 June 2020. This is in addition
to the Group’s decision to temporarily suspend international flying from 30 March to 14 June 2020, and close all Virgin Australia operated lounges across the network.

Despite the dramatic steps taken to respond to market conditions, we recognise our role as a key part of the nation’s travel industry and will work with government to maintain vital domestic routes for the transportation of essential
services, critical freight and logistics operations. We will also continue to assist customers in reaching their destinations as state borders tighten and will continue to support them with any future travel requirements.

As COVID-19 impacts significantly weakens travel demand, the Group has reviewed its cost base. Expense reduction initiatives include further cuts to its domestic and short-haul businesses and pausing key supplier agreements.
"
 

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Perhaps the answer is in staff in the back office needed for administrative tasks and regulatory compliance, plus liaising with suppliers, but it seems a little odd that 80 per cent of the workforce are being stood down but all international flights and 90 per cent of those operating domestically are ceasing.

There will be some repatriation flights, so that may also occupy some staff.
 
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Do you think VA will have enough cash in kitty to pay wages to the remaining staff past June 2020 ?
 
knagelli said:
Do you think VA will have enough cash in kitty to pay wages to the remaining staff past June 2020 ?
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I am not a financial or business analyst but there'd have to be a good chance of 'no.'

There must be all sorts of costs, such as leasing of aircraft, that are mostly hidden unless one wades through annual reports. Lessors have their own financial commitments so it's hard to see all of them becoming altruists.
 
Melburnian1 said:
I am not a financial or business analyst but there'd have to be a good chance of 'no.'
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I was just thinking what will happen to millions of travel credit issued by VA if they end up not having enough cash to cover the wages. I know this might not be the top priority for VA at this moment but still worth a serious thought.
 
Melburnian1 said:
I am not a financial or business analyst but there'd have to be a good chance of 'no.'

There must be all sorts of costs, such as leasing of aircraft, that are mostly hidden unless one wades through annual reports. Lessors have their own financial commitments so it's hard to see all of them becoming altruists.
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I imagine it would be in the best interest of leasing companies to offer to defer payments till after the crisis. Otherwise they would have aircraft which no one needs and there is still no clear picture when they may change. Parking fees to pay and I gather other costs involved in storing planes.
 
Sad news.

I received email this morning that they've cancelled SYD-OOL flight Easter Monday and put us on flight 4 hours earlier. Are they still going to be able to fly considering QLD is in lockdown? I'll try to get refund rather than travel credit as I'm not sure when the 3 of us will be able to travel together again.
 
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Melburnian1 said:
I am not a financial or business analyst but there'd have to be a good chance of 'no.'

There must be all sorts of costs, such as leasing of aircraft, that are mostly hidden unless one wades through annual reports. Lessors have their own financial commitments so it's hard to see all of them becoming altruists.
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I'd like to take the counterpoint and suggest a good chance of 'yes' if we say to the end of June 2020.

I don't know what that means on 1 Jul 2020 though..

They have a large chunk of liquidity ($1b vs QAN's $2.1b) and they've just taking the step of reducing their largest opex cost - staff.

I'd imagine there's background conversations with lessors underway. With the current market I'm not sure what a lessor would do if an airline paid out the lease.. sure there's a lump sum there but then the asset sits around and... does what?
 
knagelli said:
I was just thinking what will happen to millions of travel credit issued by VA if they end up not having enough cash to cover the wages. I know this might not be the top priority for VA at this moment but still worth a serious thought.
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It's almost a yield question in some way. Look at it this way - VA have years of data to understand what percentage of travel credit is never redeemed. Lets say it's as low as 10%. If that holds up then even if VA are issuing 10x the amount of normal travel credit, they're still going to see a large chunk of that never redeemed.

I'd imagine VA have a number of 'high' priorities as opposed to a 'top priority' as having only one priority at a time in a business this size is a good way to lose the business.. and paying staff and continuing to operate (so they can have customers confident they will be around) just as much as they will want to ensure travel credit can be spent in the future by customers..
 
Melburnian1 said:
I am not a financial or business analyst but there'd have to be a good chance of 'no.'

There must be all sorts of costs, such as leasing of aircraft, that are mostly hidden unless one wades through annual reports. Lessors have their own financial commitments so it's hard to see all of them becoming altruists.
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Virgin can get out of the leases in the current situation by invoking the Force Majeure provision of the contract. Leaving the lessors hold an unwanted aircraft and still having financial commitments. It's going to be in the lessors better interest to become altruists in the short term.
 
ja1 said:
...They have a large chunk of liquidity ($1b vs QAN's $2.1b) and they've just taking the step of reducing their largest opex cost - staff...
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It has BUT many staff will be paid annual leave over the coming weeks (or in a smaller number of cases, long service leave) so the savings here and now may not be as much as hoped.
 
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