Virgin to cut 750 jobs, racks up seventh consecutive full-year loss

Virgin Australia has flagged 750 jobs will go as it slumped to its seventh consecutive annual loss.

Virgin Australia CEO Paul Scurrah. Picture: Supplied

Virgin Australia’s new CEO will cut jobs and capacity and streamline his executive team in an effort to return the airline to profitability after the seventh annual loss in a row.

Paul Scurrah has announced 750 jobs will go, amounting to 30 per cent of positions in corporate and head office, to save $75 million a year. At the same time the group’s fleet, network and ­capacity will be reviewed with fewer domestic and international services to operate in the year ahead. Arrangements with suppliers are also in the firing line, with Mr Scurrah putting aircraft lessors, airports and maintenance providers on notice that he would be seeking better deals.

Virgin Australia chief executive Paul Scurrah in Sydney. Picture: Britta Campion

The moves are designed to return Virgin Australia to profit, after the airline posted a $315.4m loss in the 2019 financial year, compared with a $653.3m loss in 2018. The result sent shares in the airline tumbling to just 15c, before closing the day down 6 per cent at 15.5c.

Mr Scurrah said it was clear from the “disappointing result” that the company needed to become more disciplined around costs.

“Our announcements today around our organisational structure are designed to start the process of removing overhead costs from our business, through simplifying our structure, removing duplication and driving stronger accountability around revenue and revenue quality,” he said.

Most of the 750 positions set to go, were in either Sydney or Brisbane where Virgin Australia has its largest workforce and its headquarters in inner-city Newstead. Mr Scurrah said the job cuts would free up some space in the complex, which had become quite full.

“It will relieve the pressure but the impact on real estate is not what I’m focused on now,” he said. “I’m focused on transition plans for those staff members to ensure they feel like they’ve been respected on the way out.”

Others in Mr Scurrah’s firing line included unprofitable routes, which faced either the axe or ­capacity cuts, and suppliers such as airports charging excessively for Virgin Australia’s business.

“I think all of them need to understand that a strong, thriving Virgin Australia is very important to the aviation industry here, and we will be expecting their contribution,” he said.

Although he insisted low cost carrier Tigerair was an “important part of our future” despite making another loss, Mr Scurrah was not so clear on the struggling international business.

“We do need an international offering to compete in the corporate sector more strongly but how we do that — whether it’s our own metal or through deeper partnerships — is still being worked through,” he said.

Aviation consultant Neil Hansford said it would be a wise move to “dump flights to the US and Hong Kong” and rationalise capacity on trans-Tasman routes and to Bali.

“The model has to be changed as soon as possible and international abandoned or else they will run out of money,” he said.

“I’d also reduce the volume of domestic operations with seats ­offered to the market by 15 per cent, walk away from the V8 Supercar sponsorship and replace board members with industry-experienced proven personnel.”

Mr Scurrah said further announcements on capacity and network changes would be made before the end of the year.

“We are absolutely determined to be the best value corporate airline and the best value leisure airline in the country,” he said.