Virgin Australia Will Be Making Capacity Cuts

It’s no secret the past couple of years haven’t been the easiest for Virgin Australia, and unfortunately, the whole situation doesn’t seem to be changing anytime soon. The airline has been making losses year after year due to an apparent restructure in management that was never successful. The airline also operated their Hong Kong services for some time, but sadly it was never successful, and they struggled to make it worthwhile. On top of all of this, the airline has a new problem – COVID-19. Due to this virus, Virgin Australia will be making significant capacity cuts.

As with any epidemic, the virus has severe effects for many industries around the world and air travel is no exception. The overall demand for bookings and people wanting to travel is heavily limited, and by the looks of things, it’s only going to get worse until the virus is gone and things get back to normal.

Virgin Australia 737-800

Virgin Australia Will Be Making Significant Capacity Cuts

Below I’ve listed all of the major route changes that have been announced by the airline:

• Virgin Australia’s most profitable route Sydney – Los Angeles will be reduced from a daily service down to 5 times weekly. This will be in effect from early May until early June.
• Virgin Australia’s new upcoming Brisbane – Toyko Haneda service will be cut down to 3 services instead of daily from its launch date of the 29th of March until the 3rd of May.
• Auckland to Tonga officially end on the 1st of May
• Auckland to Raratonga will officially end on the 21st of July
• Domestic services will be reduced by 5% with a further 7% to come into effect in Q4 of 2020
• Melbourne – Auckland will be reduced down to daily services
• Sydney – Auckland will receive a temporary reduction

Overall, the Virgin Australia Group will cut its capacity by 6% by the second half of 2020 with a further 7.7% to be reduced in the first half of 2021. The international capacity will be reduced by 8% for the second half of this year with it being increased to 10.3% in the second half of 2021. And finally, the domestic capacity which will be reduced 5% by the second half this year and it increasing to 6.2% in the first half of next year.

Here’s what Virgin Australia CEO Paul Scurrah had to say:

“We have already announced a number of measures to mitigate the impact from COVID-19. However the pace of the global spread and decline in demand has required us to implement further changes today to minimise the future financial impact,” said Mr Scurrah.

“As a largely domestic airline, we are less exposed to the impact on international travel, however we remain disciplined in our focus on managing capacity in response to forward bookings and continuing to reduce costs across the business. It’s worth noting that domestic operations account for 88 per cent of our passengers and 78 per cent of our flight revenue.

“The reductions in services will also mean reduced flying for our crew and we are committed to working with them through this period and providing a range of options.

“Pleasingly, our travel bookings to Western Australia and local leisure destinations such as the Gold Coast, Sunshine Coast, and Hamilton Island continue to be ahead of where they were at the same time last year. This demonstrates Australians are continuing to travel within our own backyard and support local tourism.

Virgin Australia 777 Business Class Seat 9A

What else will Virgin Australia be doing to assist amid COVID-19?

• Virgin Australia will decrease how much they spend on their marketing 
• All hiring and recruitment will be paused for the remainder of this year
• No base salary increases will be awarded
• The Chairman and directors will decrease their base fee’s by 15%
• Their stopping all non-critical spend
• Focusing on trying to reduce hotel charges
• Looking for relief on government charges  
• Working hours will be reduced when available
• All bonuses will be held for the rest of the year

There’s no doubt, there’s nothing Virgin Australia could do to fight the virus, it’s inevitable, and Virgin is definitely not the only airline facing problems. It makes absolutely no sense to continue operating services that are going out empty, so these changes are meant to better cater to the lowered demand, domestically and internationally.

While these cuts are pretty big, I wouldn’t be surprised to see further changes being announced down the line. With so much uncertainty and an ever-increasing number of cases & countries introducing restrictions, the travel space is very quickly changing, and the next few months will be highly volatile.

What do you make of the changes announced by Virgin Australia?