Following last night’s national address by Prime Minister Scott Morrison, introducing an overseas travel ban, Virgin Australia (ASX: VAH) has made the difficult decision to ground 125 of its aircraft and stand down 80 per cent of its workforce.
The move follows a similar one employed by Qantas (ASX: QAN) however, Virgin’s greater reliance on its airlines business is likely to make the recovery effort notably harder for its Virgin and Tigerair fleets.
The increase in groundings will decrease its capacity from 50% to 90% with its remaining 10% retained for transportation of essential services, critical freight and logistics.
Unfortunately for many, the need to reduce its operations due to a lack of demand for travel also sees 8,000 employees stood down until at least the end of May. Employees will be able to access leave entitlements, but with the extended shutdown and likely staged re-start, the company forewarns that “leave without pay will be inevitable”.
“There has never been a travel environment in Australia as restricted as the one we see today and the extraordinary steps we’ve taken have been in response to the federal and state governments’ latest travel advice,” said Virgin Australia CEO Paul Scurrah.
“We are now facing what will be the biggest grounding of aircraft in this country’s history.
“I know our people have been working tirelessly to help guests get home ahead of the various state travel restrictions and their efforts should be applauded as they adapt to a rapidly changing environment.
“We plan to return Tigerair Australia and Virgin Australia to the skies as soon as its viable to do so, however I am mindful that how we operate today may look different when we get to the other side of this crisis.”
“I am only too aware of how much our people are hurting at the moment and these very tough decisions have weighed heavily on me and my leadership team. We are talking to our teams and we are working hard to do what we can to protect jobs and extend payments for as long as possible.”
With the mass reduction in services, Virgin has waived all admin fees associated with changing dates for flights previously booked.
The difficult decision by Virgin Australia to take such survival measures comes after Prime Minister Scott Morrison vehemently slammed travelers for entering the country over the past fortnight and failing to adhere to the 14-day quarantine laws which led to a notable rise in COVID-19 cases. This has now led to a total overseas travel ban for Australians.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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