Virgin Australia will suspend long-haul international services to Los Angeles and Tokyo and offload of its Boeing 777 and Airbus A330 fleet under the airline’s new “stronger, more profitable” business strategy.
Recently acquired by US company Bain Capital and in preparation of exiting voluntary administration, Virgin Australia will place a greater emphasis on reestablishing itself as an “iconic Australian airline”, centred around its domestic and short-haul international business.
“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,” said Virgin Australia Group CEO and Managing Director Paul Scrurrah.
The plan will see a simplified all-Boeing 737 mainline fleet aimed at trimming costs and “removing operational complexity”. That involves the removal of Virgin Australia’s ATR turbo-props used on regional routes, it wide-body Boeing 777-300s and Airbus 330 workhorses, along with the demise of no-frills subsidiary Tigerair and its A320 jets.
The group will continue to operate its regional and charter fleet, but the Virgin Australia Regional Airlines (VARA) arm is being reviewed.
“Our initial focus will be on investing in the core Virgin Australia domestic and short-haul international operation alongside our 10 million member strong Velocity Frequent Flyer program, continuing to offer an extensive network of destinations, a domestic lounge network and value for money for customers,” Scurrah said.
On the long-haul overseas front, Virgin Australia Group says that given the current international travel restrictions it makes no sense, at least for the foreseeable future, to maintain its operation to the USA and Japan, but “with the intention to recommence and grow long-haul flights when sufficient demand returns”. Instead, Virgin Australia will rely on its existing codeshare partnership arrangements to maintain an international presence.
Scurrah said, “strong competitive airlines are critical in helping restore the economy.”
The reenergised Virgin Australia will target business travellers, including corporates and leisure travellers, maintaining its dual-class cabin product and offering an extensive network of domestic and short-haul international routes, including frequent capital city connections. The airline will also maintain a network of lounges in key domestic locations, which will reopen when demand picks up.
The group will also plough significant funding into its digital replatforming of the airline and the Velocity Frequent Flyer program.
Approximately 3,000 roles will be terminated as a result of the new business strategy, involving voluntary redundancies, redeployment, leave without pay and flexible work options will be explored. Those roles will primarily be across operations functions and corporate positions, however, Virgin is hopeful to recruit some 6,000 jobs, potentially 8,000, “when the market recovers”.
All travel credits and Velocity Frequent Flyer points will be carried forward under Bain Capital. Virgin Australia will provide customers with the value of their travel credits post-administration, with booking dates extended to 31 July 2022 for travel until 30 June 2023.
Tigerair Australia customers affected by the carrier’s discontinuation will be provided a travel credit for use on Virgin Australia operated services.
“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,” Scurrah concluded.