Virgin cuts fleet and flights as virus outbreak hits bottom line

Virgin Australia is cutting flights as it anticipates at least a $50 million hit from the COVID-19 outbreak.

Virgin Australia is cutting flights as it anticipates at least a $50 million hit from the COVID-19 outbreak. Photo: Getty

Virgin Australia is cutting its fleet and canning more flights as the continuing outbreak of the coronavirus hits demand for international and domestic routes.

The cuts also affect Virgin subsidiary Tigerair, which will abandon five loss-making domestic routes by May.

It came as the Virgin Australia group said on Wednesday it expected a $50 million-$75 million hit from the virus outbreak in the second half of this financial year. Group chief executive and managing director Paul Scurrah said the airlines were operating in a tough market.

“We need to make sure our capacity deployment is disciplined to ensure our routes are profitable for our business,” he said.

“Coronavirus is having a significant impact on the travel industry and these changes will help us manage the changes we’re seeing in demand.”

Virgin had already said earlier in February it would quit flying the “challenging” Sydney-Hong Kong route because of falling demand following prolonged civil unrest in the former Chinese colony and uncertainty around the coronavirus outbreak.

On Wednesday, in announcing its half-year results, It said it would also cut short-term capacity on Trans-Tasman and Cairns routes.

Less than a week ago, rival Qantas also slashed its flights to Asia, blaming falling demand on the Hong Kong protests and reduced freight demand.

Chief executive Alan Joyce also urged Qantas workers to consider taking using “their leave balances, which are quite considerable”.

“We can extend how long the cuts are in place, we can deepen them or we can add seats back in if the demand is there,” he said.

On Wednesday, Virgin said its route and frequency changes would mean a combined cut to the airline’s capacity by 3 per cent by the end of this financial year.

“The changes focus largely on leisure destinations where demand is weaker, and where Virgin Australia and Tigerair both operate,” the airline said in a statement on its website.

Virgin posted a $88.6 million net loss for the first half of the financial year.

Mr Scurrah said revenue and passenger numbers had grown in the first half, but the group was still in the early stages of moving to a lower cost base.

“There’s further work to do on costs and we will continue to review the network and our capacity in line with demand,” he said.

Tigerair will take seven aircraft out of service by October 2020 – on top of five already announced in November 2019. The routes it will abandon by May are Melbourne-Coffs Harbour, Sydney-Coffs Harbour, Adelaide-Sydney, Sydney-Cairns and Hobart-Gold Coast.

Virgin will buy no new planes until July 2021 after putting off its planned purchase of the still-grounded Boeing 737 MAX.

-with AAP

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