This exit out of voluntary administration is being described as a "resetting" under Bain Capital. Apart from the famous red brand, Virgin Australia stands to be unrecognizable after such a restructuring.
Following months of uncertainty since entering voluntary administration in April, Virgin Australia on Wednesday laid out a drastic restructuring plan.
Its new owner Bain Capital, which fended off competition from New York investment firm Cyrus Capital Partners, wants to axe a third of its workforce, slim down its fleet and relocate its headquarters. However, it insisted the actions are needed to safeguard the remaining 6,000 direct roles, and indirect employment for 30,000 people.
The announcement follows Virgin Atlantic’s latest struggle for survival — on August 4, it filed for bankruptcy in the U.S.
Australia is currently taking extra precautions to prevent further spikes in coronavirus cases, with Victoria declaring a state of disaster that includes a night-time curfew for residents in Melbourne. And after closing its borders with Victoria, Queensland is doing the same with New South Wales and the Australian Capital Territory.
A New Look
The airline expects a slow recovery, and is continuing its suspension of flights to Los Angeles and Tokyo, with any passengers wanting to fly internationally now having to rely on the airline’s codeshare partners.
“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,” said Paul Scurrah, Virgin Australia Group CEO and managing director, in an update to the Australian Securities Exchange.
Virgin Australia said that 3,000 jobs will be cut, but that in the future it had “aspirations” to recruit 2,000 in the future, pending a recovery.
It is also moving to an all-Boeing 737 fleet, and removing ATR, Boeing 777, Airbus A330 and A320s aircraft.
Meanwhile, its Tigerair brand is to be dropped, but it will hold on to its Air Operator Certificate in case the opportunity arises to operate an ultra-low-cost carrier for domestic flights in the future.
“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,” Scurrah added.
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Photo credit: Virgin Australia continues to suspend flights to Los Angeles and Tokyo. Brendon Thorne / Bloomberg