Virgin axes 3,000 jobs and scraps Tigerair as airline plans recovery

Virgin axes 3,000 jobs and scraps Tigerair as airline plans recovery

A simplified business structure for Virgin Australia (ASX: VAH) will result in 3,000 jobs being lost as the company plots its post-administration recovery plans.

The airline, which is to be acquired by US private investment firm Bain Capital, will also bid farewell to its budget brand Tigerair as part of a business reset.

The relaunched Virgin will be smaller, with an exclusive focus on domestic travel until the global travel market recovers.

According to Virgin Australia Group CEO and managing director Paul Scurrah the reset plan will re-establish the brand as an iconic Australian airline, securing approximately 6,000 jobs in the process.

"Our aviation and tourism sectors face continued uncertainty in the face of COVID-19 with many Australian airports recording passenger numbers less than three per cent of last year and ongoing changes to government travel restrictions," says Scurrah.

"Demand for domestic and short-haul international travel is likely to take at least three years to return to pre-COVID-19 levels, with the real chance it could be longer, which means as a business we must make changes to ensure the Virgin Australia Group is successful in this new world."

As such, Virgin will simplify its fleet and retain only Boeing 737 aircraft plus its regional and charter planes. ATR, Boeing 777, Airbus A330 and Tigerair Airbus A320 aircraft types will all be retired.

The group will also undertake a supplier contract review across its operations including products, services and facilities to better align with the company's new size as a smaller airline.

Further, it will consolidate its footprint and move its corporate headquarters to 275 Grey Street in Brisbane's Southbank.

While Virgin says international operations will eventually come back online, for the time being flights to Los Angeles and Tokyo will remain suspended.

According to Virgin the Tigerair brand will be suspended because there is not sufficient customer demand to support two brands at this time. Tigerair's Air Operator Certificate will be retained however in the hope that there will one day be an opportunity to relaunch a budget airline in the future.

For the 3,000 staff made redundant as part of the review Virgin says their entitlements will be paid in full.

Bain Capital says all travel credits and Velocity Frequent Flyer points will be carried forward under its ownership, and expiration dates for travel credits for flights booked pre-administration to be extended to 31 July 2022 for travel until 30 June 2023.

"Even when we do see a return to pre-COVID-19 levels of travel, successful airlines will be influenced by demand and look very different than the way they did previously, requiring long-term capital, a lower cost base and be more focused on providing exceptional experiences through a combination of great people and world class technologies," says Scurrah.

"Working with Bain Capital, we will accelerate our plan to deliver a strong future in a challenging domestic and global aviation market. We believe that over time we can set the foundations to grow Virgin Australia again and re-employ many of the highly skilled Virgin Australia team.

"Virgin Australia has been a challenger in the Australian market for 20 years, and as a result of this plan and the investment of Bain Capital we are going to be in a much stronger position to continue that legacy."

Virgin Australia's plans to restart came hot on the heels of the news that sister airline in the US Virgin Atlantic had filed for bankruptcy.

That decision came just more than a month after the airline announced it had secured funding to survive for another 18 months.

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