Virgin Australia cuts 90 per cent of flights, stands down 8000 workers

Virgin Australia chief executive Paul Scurrah says Australia’s travel and tourism industry will not survive the coronavirus shutdown without more government support after his airline grounded almost all of its fleet and stood down 8000 workers.

The nation's second-largest airline on Wednesday said it would ground 125 aircraft at the end of the week, cut flying in its domestic network by 90 per cent and send 80 per cent of its employees home at least until the end of May. Budget arm Tigerair suspended all its flights on Wednesday.

Mr Scurrah said the coronavirus pandemic had caused an unprecedented crisis for the global aviation industry as travel ceases internationally and is severely restricted within Australia.

With virtually no new bookings, Mr Scurrah said the airline's almost complete shutdown was necessary to preserve its remaining $900 million cash balance "for a long as it possibly can".

"Nobody knows how long this crisis is going to last for," he told The Sydney Morning Herald and The Age. "We’ve taken action that will preserve cash for as long as possible and that’s based on an assumption that this will be a long crisis.”

Mr Scurrah said that he was in discussions with government about further support for the travel and tourism industry, which employs more than 600,000 people, following last week's $715 million package.

“Our sector is going to need some support for us to get through. What we’re seeing is every single airline in the world is talking to their government about support," he said.

However, Qantas has been pushing back against a government bailout for Virgin, going so far as to ask employees to lobby their local MPs against it.

Qantas on Wednesday secured $1.05 billion in fresh debt (at 2.75 per cent over 10 years) to help see it through the crisis, secured against seven Boeing 787 Dreamliners. Qantas' shares jumped 20 per cent on the news, but are still trading 53 per cent lower compared to late February.

Mr Scurrah would not comment on what type of help he was asking government for, other than that it would be for the whole industry, not just Virgin.

Virgin is 90 per cent owned by the government-backed Singapore Airlines, Etihad Airways, the Chinese groups HNA and Nanshan, and Richard Branson’s Virgin Group.

Virgin Australia said it was reducing its domestic capacity by 90 per cent and suspending Tiger Airways' domestic services, effective immediately.Credit: Bloomberg

Mr Scurrah would not say whether any of its owners could support Virgin financially. Analysts say this is unlikely, given they are also airlines being ravaged by the pandemic.

Asked why Australian taxpayers should bail out an airline owned by foreign interests, Mr Scurrah pointed to the 16,500 people Virgin employs directly and indirectly and its importance for competition.

“It’s crucially important that we have a competitive and robust aviation sector with two full-service airlines,” he said.

Transport Minister Michael McCormack said in a statement that he continued to “work with industry in responding to this crisis.” Labor’s shadow transport minister Catherine King renewed her calls for “urgent” industry support, particularly for regional airlines.

Pilots, engineers join call

Unions representing Qantas and Virgin pilots and engineers wrote to Mr McCormack on Wednesday calling for support for workers to be included in any further industry assistance, and do everything possible to ensure a “viable and competitive aviation industry” following the downturn.

“The industry needs more government support to ensure it survives this downturn,” the unions said. Government should ensure any money given to airlines was not then used for share buy-backs or dividend payments, they said.

The Transport Workers Union, which represents baggage handlers and ground crew, said the government should step in to pay up to 80 per cent of the wages of stood down airline workers. The British government has launched a similar policy.

The TWU criticised Virgin for standing down staff but said that unlike Qantas, it had agreed to discuss compensation when the crisis passed.

Flights end Friday

Virgin's new capacity cuts will take effect from midnight this Friday, and come after the airline already reduced domestic flying by half and was set to cease all international flights from March 30.

Like at Qantas, workers sent home will be able to use leave entitlements but otherwise will not be paid.

Qantas has cut its domestic flying by 60 per cent and is expected to ground more planes as states close off their borders. Two-thirds of its workforce - 20,000 people - have been stood down.

Virgin said it was working with 25 partners to find short and long-term job opportunities for affected employees.

The financially troubled airline would return to the skies as soon as was viable, Mr Scurrah said, however he said how it operates "may look different when we get to the other side of this crisis".

Virgin said it would continue to fly daily services to 17 destinations to transport essential services, critical freight and logistics. Services to 19 destinations will be suspended entirely.

The coronavirus has obliterated airline demand internationally and within Australia, as states close borders and governments recommend against all but essential travel.