The Virgin Australia Holdings Ltd (ASX: VAH) share price is rising with the S&P/ASX 200 Index (ASX: XJO) today as the company announced further capacity reductions in response to COVID-19.
Virgin has slashed capacity and stood down the majority of its workforce as border closures escalate across Australia. Shares in the airline have fallen 50% from their February high of 14 cents and are now trading at 7 cents.
Further capacity cuts
Today, the airline announced further capacity reductions with Group domestic capacity to be reduced by 90% from midnight on Friday until 14 June 2020. Services to 19 destinations will temporarily be suspended, with just 17 destinations remaining connected.
Tigerair Australia will cease flying immediately. 10% of domestic capacity will be retained for transportation of essential services, critical freight, and logistics. Additionally, 125 aircraft have been temporarily grounded.
Virgin CEO and Managing Director Paul Scurrah said, "from the end of this week we will begin repositioning and grounding more than 125 aircraft, suspending almost all domestic and international flying until at least the middle of June."
Virgin had previously announced that all international flights would be suspended from 30 March to 14 June. It has closed all of its lounges across the network. The airline said it would work with the government to maintain domestic routes for the transportation of essential services, critical freight, and logistics operations.
Paul Scurrah said, "there has never been a travel environment in Australia as restricted as the one we see today. We are now facing the biggest grounding of aircraft in this country's history."
Staff stood down
Virgin is temporarily standing down approximately 8,000 of the company's 10,000 person workforce until at least the end of May. Employees will be able to access accrued leave entitlements, but for many, leave without pay will be inevitable. Virgin is working with a number of partners to identify short and long term redeployment options.
Consultation will be commenced on a proposal to close its New Zealand cabin crew and pilot base, as well as its Tigerair Australia Melbourne pilot base. This is intended to safeguard Virgin's domestic and short-haul international businesses through the coronavirus pandemic.
"We plan to return Tigerair Australia and Virgin Australia to the skies as soon as it is viable to do so, however I am mindful that how we operate today may look very different when we get to the other side of this crisis," Scurrah said, "my focus has been on guiding this company through the crisis, and at the same time ensure the business is set on a sustainable path when the recovery eventually comes."
