Finance Consumer Virgin axes more flights, slashes bonuses as virus bites
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Virgin axes more flights, slashes bonuses as virus bites

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There are growing calls to overhaul the airline industry. Photo: Virgin Australia
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Virgin Australia is cutting more flights and executives’ fees, and will seek relief from government charges, as it joins rivals in trying to soften the impact of the global COVID-19 pandemic.

The airline on Friday suspended full-year earnings guidance as it flagged reductions in its Los Angeles, Japan, and trans-Tasman services, as well as announcing it would quit flying from Auckland to Tonga and the Cook Islands.

Virgin said its total capacity cuts would increase from 3 per cent to 6 per cent in the second half of the 2020 financial year and rise to 7.7 per cent in the first half of 2021.

It has also temporarily cut fees for its chairman and independent board directors by 15 per cent and frozen management bonuses.

Virgin rivals Qantas and Air New Zealand have also reduced seats on international and domestic flights more than once in quick succession.

Earlier this week, Qantas cut capacity for the second time in less than a month. It has now reduced its passenger capacity by nearly a quarter on a year ago, and grounded all but two of its Airbus A380s.

Chief executive Alan Joyce – who will take no pay for the remainder of this financial year – said airlines were in a battle for the “survival of the fittest” as the coronavirus outbreak wound on.

Air New Zealand has cut its overall passenger capacity by 10 per cent – and flights into Asia by 26 per cent. Air New Zealand chief executive Greg Foran has reduced his pay by 15 per cent.

Virgin said it would also freeze external recruitment and the use of consultants for the remainder of this financial year – and seek government relief on charges.

It had already announced last month it was slashing its Tigerair fleet and cutting back on flights to rein in costs as the coronavirus hit demand for leisure destinations and its budget airline’s routes.

It tipped an earnings hit of between $50 million and $75 million in the second half but suspended this guidance on Friday.

Virgin shares dipped back to Thursday’s all-time low of 5.0 cents within 25 minutes of trade on Friday.

The one bright spot for Virgin is domestic tourism. Chief executive Paul Scurrah said travel bookings to Western Australia and local leisure destinations such as the Gold Coast, Sunshine Coast, and Hamilton Island were up on a year ago.

“This demonstrates Australians are continuing to travel within our own backyard and support local tourism,” Mr Scurrah said.

Passengers on flights affected by Virgin’s latest round of cuts will be contacted and offered alternative travel arrangements. That will include refunds for routes that have been axed.

Passengers with international bookings up until June 30 will be able to change their flight to a later date or a different destination, without fees.

-with AAP