Virgin Australia axes all flights except one daily Sydney-Melbourne

As it scrambles to conserve cash and faced with plummeting demand, Virgin Australia slashes its schedule.

By David Flynn, April 9 2020
Virgin Australia axes all flights except one daily Sydney-Melbourne

Virgin Australia is suspending all domestic flights except for a single Sydney-Melbourne return service, which will run once per day except for Saturdays.

All other flights, including to and from its operational headquarters and spiritual home at Brisbane, will be axed as of Friday April 10.

"Since our last capacity reduction announcement we have seen demand all but dry up, and our load factors are very low", Stuart Aggs, Virgin Australia's Chief Operations Officer, has written to staff in an internal email sighted by Executive Traveller.

Aggs says the pared-back schedule will remain in place until Monday 15 June.

"As you know, we are doing everything we can to preserve our cash balance, and given we are seeing little to no demand on our existing skeleton schedule, it is appropriate that we reduce our capacity further."

"As soon as demand returns and the border restrictions are relaxed, we stand ready to ramp back up to demand, which I know everyone is keen to do," Aggs ended.

Rescue flights continue

A statement issued by Virgin Australia explained that "as a result of government restrictions, less people are travelling and we have made changes to our schedule to reflect this."

“We continue to operate a daily service between Melbourne and Sydney, provide cargo transport locally and overseas, and operate charter flights including those assisting the government in bringing Australians home.”

This includes this month's repatriation flights from Los Angeles and Hong Kong which have been underwritten by the Federal Government, along with charter flights such as this weekend's Brisbane-Paris Boeing 777-300ER journey chartered by the French government.

One flight away from shut-down

This puts Virgin Australia one flight away from a total shutdown – a path which other airlines, including Austrian and EasyJet, have already embraced in a last-ditch attempt to survive what is looking like a prolonged coronavirus pandemic with an uncertain recovery curve.

"There has never been a travel environment in Australia as restricted as the one we see today," Virgin Australia CEO Paul Scurrah said recently. "We are now facing what will be the biggest grounding of aircraft in this country's history."

Virgin has also ramped up its push for a $1.4 billion bailout from the Federal Government, with Scurrah lobbying that the rescue package is essential not only to the airline's survival but to competition, painting a dark picture of a Qantas-Jetstar monopoly on domestic routes.

Virgin's $1.4bn bailout plan

It's reported that under the plan, if the airline was unable to repay the loan in full within two to three years, the government would take an equity stake in the company.

Qantas CEO Alan Joyce has responded that the Government "can’t pick winners and losers" and that any aid should be shared across the sector, with a suggestion that Qantas would ask for $4.2bn based on the proportional to the size of each airline.

Last weekend saw Virgin halt the transfer of its Velocity frequent flyers points to the KrisFlyer loyalty program of partner and stakeholder Singapore Airlines: a process which observers said would have imposed a substantial cash drain on an already financially-fatigued airline.

While Virgin had an estimated $1.1 billion of cash on hand at the end of 2019, Credit Suisse analyst Paul Butler has advised clients that Virgin could burn through $860 million of that cash stash by June and need a further $829 million next financial year.

The airline has suffered through seven straight years of losses, with an $88m loss for the most-recent half-year of July-December 2019.

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

Virgin Australia - Velocity Rewards

22 May 2013

Total posts 25

Think the writing is on the wall even more so now :(

09 Apr 2020

Total posts 6

No point flying if no one on the planes and boarders closed, look at Easyjet, Ryanair etc... let the time tell the true outcomes

09 Dec 2016

Total posts 14

Is it a regulatory requirement that they have to keep operating? If they shut down for 6 months or more would they risk losing their licence to operate?

10 Apr 2016

Total posts 39

sounds like it ... maybe the start up process would be longer to achieve their air operators certificate if they no longer had any flights

04 Jun 2018

Total posts 16

VARA is still operating in WA, and probably had its busiest week in a long time with FIFO charters observing social distancing. Will be interesting to see the impacts, if any on VARA operations if things take a turn for the worst at Mainline VA.

Qantas - Qantas Frequent Flyer

13 May 2018

Total posts 2

Question, as that means the flights are cancelled by the airline, does that allow to get a refund and not just a travel credit (which they offer for the usual cancellations which are initiated by customer side)?

1A
1A

17 Sep 2019

Total posts 6

Many much larger airlines worldwide have stopped all flights long ago. This is not a surprise, and a wise business decision. Do you armchair experts think flying around with 10 passengers because borders are closed by government decisions can be maintained for another 6 months or more?

Lucky some of the commentators are not airline CEO's.

09 Dec 2016

Total posts 14

Who's the armchair expert? 1A? :)

Qantas - Qantas Frequent Flyer

21 Jan 2014

Total posts 247

10 is a party, my son was on one yesterday with 4 people on board, it's a smart move, just burning cash otherwise.

Qantas - Qantas Frequent Flyer

28 Oct 2011

Total posts 358

Given that the two daily flights will require pilots, flight attendants, ground agents, engineers, maintenance, etc - is that financially feasible? Surely the staffing costs will be way more than the income from the two flights?

01 Sep 2019

Total posts 7

Having excess staff is Virgins strong suit. They still have over 2000 active employees to operate 1 return flight a day and yet I still can't get through to them on their phone lines about cancelling my flights later this month (virgin and velocity)

08 Jul 2014

Total posts 11

Just go online and do it there. It's easy. I did it the other day.

01 Sep 2019

Total posts 7

I don't want a travel bank though. I want a full refund.

AJW
AJW

16 Nov 2011

Total posts 555

Maybe there are non fiscal reasons for running them, because yeah it is pretty pointless.

Qantas - Qantas Frequent Flyer

07 Aug 2013

Total posts 106

Apparently interstate flights quiet full shuffling essential people over - company I work for requires travellers from Brisbane as FIFO. Now advised 'another airline' will only operate Brisbane to Perth once a fortnight disrupting FIFO workforce ops..VA may have been first but expect QF to severely cut too.

I'm expecting reluctant voluntary administration next. Soon sadly.

Qantas - Qantas Frequent Flyer P1

23 Aug 2014

Total posts 43

The slow insidious demise of Virgin had begun well before C19 on multiple levels

10 Apr 2016

Total posts 39

To be fair the new CEO appeared to be changing the previous ridiculous approach of copying the Qantas business model and taking them head on.

When it comes to the crunch the Government will not let them fail.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 192

VA will likely 'survive in some form', the question is will the Scurrah have to call in the 'Voluntary Administrators' to do it. Remember that VA owns half the 737 fleet and 4x 777-300ERs.

VA's owned 737 fleet may potentially be used to form a "mk II" operation if voluntary administrators are called into VA. The successor operation may even revert to the old DJ LCC roots, and may even not be called 'Virgin', which will saving money by not paying RB licensing fees.

The tricky part is the 777-300ERs, although the LAX operations alone was profitable, the entire VA international operation was loss-making overall.

Add to that the used wide-body market is depressed and there are very little operators (if any at all) interested in 2nd-hand wide bodies in this current environment.

AJW
AJW

16 Nov 2011

Total posts 555

Whilst the current circumstances you may well be right that the Government won't let them fail, history shows is that in a similar circumstance of having a major carrier fail they did let it fail.

Virgin Australia - Velocity Rewards

06 Mar 2015

Total posts 152

Am I correct in assuming VA will still honour my already paid for full fare Business Class Ticket from Perth to Brisbane if and when they do start flying again?

I would certainly hope so and would be surprised if they did not but one never knows until one asks.

Qantas - Qantas Frequent Flyer

31 Aug 2013

Total posts 9

Looks like qantas might be almost at the same point for many routes. East - West flights pretty much down to zero. A couple a week by the looks. Any intel on that? Nothing on the qf domestic route disruption / changes page...

10 Apr 2020

Total posts 5

They could rebrand as V Australia, with the V for 'Value'. Hence minimal cost involved in repainting planes and other signage, plus no fee required to Virgin, in customers mind Virgin or V wouldnt notice any differnce.

They should then consolidate the fleet to one manufacturer rather than have various incompatable models. Considering they own Boeing, stick to it and pass off the leases on the others (administration) could be a way to do this.

If they want Tigair use them for what they were introduced for as LCC and have them fly routes unprofitable for V as a LCC could make some of the routes work. V to concentrate on Captical cities and profitable leasure destinations.

Aviation is simpler that Rocket science, so they just stick to what works and dont overcomplicate it nor trying to cater to everyone as it doesnt work. Nothing wrong with sticking to BNE/SYD/MEL/ADL/PER markets add to it some leisure to QLD/TAS/NT and the FIFO

24 Sep 2019

Total posts 8

Some good suggestions here but no new ideas. Virgin has been consolidating their fleet for some time. They stopped flying the e-jets and were slowly divesting themselves of A320 and A330 stock, but when you are locked into leases these things can't happen overnight. They have done the best they can in a diabolical situation. I've heard word of QF flights running with 6 or less passengers so it isn't like they have got a magic solution to the ‘do not travel' message that we are currently bombarded with on a daily basis. Add to that the shutting of state borders and coronavirus has crippled every airline in the country. The loss of Virgin would be devastating for the airline staff, but even more so for the tourism operators that have thrived courtesy of the influx of visitors that the airline has delivered over the past 20 years. The ripple effects on the broader economy would be enormous and for that reason alone we should all be rooting for their survival. I bet the staff at Flight Centre are!

Qantas - Qantas Frequent Flyer

09 Feb 2015

Total posts 296

So many ‘experts' with their armchair CEO wisdom.....:)

10 Apr 2020

Total posts 5

Why do you say that, what has been mentioned as 'expert' advise as you put it is actually what most succesful airlines do. So its not anything revolutionary, but as can be seen from their efforts they havent even been able to manage a simple task which many of the top executive on big bucks hasnt been able to action or implement

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 192

Coming from the same expert claiming that 'so-called messiah' SQ will rescue VA for the past 5 years right? ;)

Qantas - Qantas Frequent Flyer

09 Feb 2015

Total posts 296

Are you referring to me @ DanV? While I did state on an earlier article last week that I personally believe SQ will take over VA, I certainly have not mentioned this prior.

05 Mar 2015

Total posts 84

I am not the first to suggest this but Virgin should really consider just becoming a great domestic competitor against Qantas and Jetstar. Forget about the USA, maybe try to get Delta as a partner on codeshares. Forget about Asia. Forget about NZ or just run a handful of flights to the key destinations, but maybe now that Borghetti and Luxon have both gone, the 'bad blood' will have gone with them and Virgin and Air New Zealand can get back into a partnership. Ditch Tiger, too. Just have one Virgin Australia brand and fleet, get really stuck into being a domestic alternative and be the 'anti-Qantas'!

20 Oct 2015

Total posts 41

QFP1, I agree and think Virgin could compete against QF and even JQ to some degree if it got really aggressive with pricing, maybe have 'Economy Basic' fares with carry-on only. Get rid of serving free inflight meals and snacks in economy, except for east-west flights, and encourage people to buy their meal at the airport. A few years back Virgin actually had a proposal like this in place, I think this site reported on it, the airline would do a deal with some airport f&b outlet like Sumo Salad and Sumo would have a cart or stand at the boarding gate, they would sell meals and drinks and snacks to passengers who would then take them on board. Virgin wouldn't have any food on board for economy unless you wanted to buy it, but the ideal would be to have no food and everyone buys their meals before boarding, then crew just collect the rubbish in bags near the end of the flight. If Virgin really gets serious about competing with Qantas it can do so, it just needs to get itself 'downsized' to a domestic airline and attack from there.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 192

All great ideas above, however with the diabolical shareholder situation VA is in, restructure is very unlikely with the current shareholder makeup.

One of the few (if not only) ways for VA to downsize to a domestic competitor is to simply file voluntary administration. Call the administrators in and let them research if a "VA mk II" is feasible from VA's assets (which is half the 737 fleet and the 77W fleet), and if a "mk II" is feasible (think Ansett Mk II), restart the mk II (doesn't necessarily have to carry the 'Virgin' name) as an LCC like AN Mk II was.

A VA Mk II is likely to be a LCC or a hybrid with Euro Business (rather Premium Economy with extra leg room and the middle seat blocked) in the first 2-3 rows.

As for partnering with other LCC's. VA's Tiger subsidiary was a founding member of the Value Alliance, perhaps the post-administration VA successor (the mk II airline) could research on rejoining the Value Alliance with the other Asian LCCs, with Scoot or Cebu Pacific doing some of the long-haul flying.

Qantas - Qantas Frequent Flyer

04 Nov 2017

Total posts 192

As for VA filing Voluntary Administration, it would allow VA to 'relieve' the current 'shareholders' of their responsibilities.

While the likes of SQ, EY et al may not be happy at being removed from control of VA by voluntary administrators, it may be a good thing in the long-run for VA and perhaps the struggling shareholders themselves considering the debt that EY and HNA are in.

If a "mk II" operation is feasible from VA's owned 737 fleet for administrators to attract a new buyer, great. If a "mk II" isn't deemed feasible by administrators, the owned 737s and 777s would be sold off to pay off creditors at the same time as returning the leased aircraft.


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