Virgin Australia reset ‘puts us in good shape’: CEO Paul Scurrah

Virgin Australia is preparing for another transformation when it re-emerges from administration in the midst of a global health pandemic.

Paul Scurrah in front of his temporary new office, a former aircraft fuselage, at Virgin Australia’s new headquarters in South Brisbane. Picture: Lyndon Mechielsen

Virgin Australia, having transformed from a budget airline to a premium one nine years ago, is preparing for another transformation when it re-emerges from administration in the midst of a global health pandemic.

It’s a challenge that would appear almost foolhardy to many, six months after going into administration with debts of $6.8bn.

But with new owner Bain Capital installed, Virgin CEO Paul Scurrah insisted the events of recent months had given the airline every chance of success in the COVID-19 crisis.

“I certainly don’t believe it’s impossible at all,” Mr Scurrah told The Australian.

“I think (administration) has provided a huge opportunity for us to reset and to emerge with a much stronger balance sheet and a much lower cost base, which is what we’re going to need going into what will be a fairly competitive market in the early days.”

Although he is adamant customers will not notice a lot of difference between pre- and post-administration Virgin, the carrier is, like Qantas, in the process of shedding thousands of staff — at least a third of its workforce.

In response, the airline recently traded four buildings at the “Virgin Village” in Brisbane’s Bowen Hills for four floors of an office tower in South Brisbane.

Formerly tenanted by Flight Centre, which also downsized in the pandemic, Mr Scurrah’s temporary new office is, perhaps fittingly, an aircraft fuselage.

The rest of the floor is largely empty while the fit-out continues, and because most of the 1000 employees based at Virgin HQ are still working from home for social-distancing reasons.

Rather than a reminder of the bruising effects of administration coupled with the COVID crisis, Mr Scurrah saw the changed environment as a “new beginning”.

“I think the most important element of this move is it’s the first time in a long time we’re able to look forward rather than looking back,” Mr Scurrah said.

“It’s a nod to the future; it’s a good vibe but it has been a really tough journey for our people.”

There were more glimmers of hope on the horizon in the form of the pent-up demand for travel, on display whenever border restrictions are eased.

The recent reopening of South Australia to NSW triggered a flood of bookings for Sydney-Adelaide flights, making it the airline’s most searched for and top-selling route last week.

Mr Scurrah was confident a trans-Tasman bubble would deliver similar results.

“We’re keen for that to happen of course because New Zealand forms part of our plans and we want to re-emerge there with a strong presence,” he said.

“The health of Australians and New Zealanders comes first, but when the medical advice supports opening up city pairs, we’re very keen to jump on that and do our part to get the tourism industry ticking over again.”

One possibly less welcome development for Virgin Australia was the likely addition of a new competitor on key routes in the form of Regional Express (Rex).

The Wagga Wagga-based airline is pushing ahead with its plan to compete with Qantas and Virgin Australia on the “Golden Triangle” routes of Melbourne-Sydney-Brisbane, using a leased fleet of former Virgin 737s.

Rex has nominated March 1 as the date for its first Melbourne-Sydney service, by which time border closures should be no more than a bad memory.

Mr Scurrah said the routes were some of the most “heavily frequented in the world” and he was confident of successfully competing with anyone for a sizeable chunk of the market.

“We don’t shy away from competition be it Rex, Qantas or Jetstar,” he said.

“We are setting ourselves to focus on the existing Virgin customers, making sure they get what they want, making sure we provide the product that they want. The market promise we’re making is about being the best value airline in the country for business and leisure travellers.”