The Virgin Australia Holdings Ltd (ASX: VAH) share price has jumped this morning, currently 4.7% higher after increasing as much as 12.7% earlier.
This comes after it announced a suspension to all international flying and cut domestic capacity to 50% in response to the coronavirus outbreak. The cuts were follow expanded government travel restrictions and increased impacts from coronavirus on travel demand.
CEO Paul Scurrah said, "we have entered an unprecedented time in the global aviation industry, which has required us to take significant action. We have responded by making tough decisions which include reducing our domestic capacity and phasing in the temporary suspension of international flying for a period of two and a half months."
Virgin Australia suspends international flights
All Virgin Australia international services will be suspended from 30 March to 14 June inclusive. The Melbourne to Los Angeles service will be suspended from 20 March, the inaugural Brisbane to Haneda service postponed from 29 March, and the inaugural Melbourne to Denpasar service postponed from 29 March.
The international flying changes include the grounding of five Boeing 777s, one Airbus 330, and fourteen Boeing 737s from the group's international fleet. Virgin will operate a reduced international schedule between now and 29 March to enable Australians to return home and visitors to return to their point of origin.
Virgin Australia reducing domestic flights
Due to weakened demand, Virgin will reduce domestic capacity by around 50% until 14 June. This includes the grounding of twenty Boeing 737s, six A320s, two ATRs, and five Airbus 330 aircraft from Virgin's domestic fleet. The impact of the international and domestic cuts is equivalent to the temporary grounding of 53 aircraft from the group's fleet.
Mitigating measures take by Virgin Australia
Virgin is taking a range of measures to address the current situation with staff including the use of accrued annual leave, leave without pay, redeployment, and in some cases, redundancies. The Chairman and board director fees have been temporarily reduced by 15%, management bonuses removed, and there will be no base salary increases for non-EA team members.
Virgin shares have already been smashed in the coronavirus maelstrom, falling nearly 60% from 14 cents in February to just 6.6 cents at the time of writing. The airline industry as a whole has come under increasing pressure as the virus spreads, with Qantas Airways Limited (ASX: QAN) and Jetstar slashing 90% of their international flights on Tuesday and cutting domestic capacity by 60%.
Australian Govt throws struggling airline industry a lifeline
The Federal Government has just announced a $715 million bailout package to assist the struggling industry in its latest round of economic stimulus measures.
The Government will forgo fuel excise, air service charges, and regional security fees. The move is expected to give an upfront benefit of $159 million, with the government refunding charges paid since 1 February.
