Virgin Atlantic is all set to cut a further of 1,150 jobs and put another 600 cabin crew on extended furlough beyond October. The company is doing this despite securing a £1.2 billion rescue plan that was signed off by a US court last Thursday night. Virgin declared these additional job losses along with the 3,150 job losses already announced since March. The company said that this was heartbreaking, but essential as well to ensure its survival, with international travel recovering more slowly than expected due to COVID-19. On Thursday last week, the airline company gained court approval for its refinancing package, which is fairly designed to see it through at least for the next 18 months. The financial package includes a pledge of £200m from Sir Richard Branson’s Virgin Group, who is also the airline’s biggest shareholder, and all the creditors agreeing to reduce and defer Virgin Atlantic’s debts.
The airline company said in a statement that it had to take this step to cut overall costs in order to survive the dark times. And unless and until travel returns in greater numbers, the survival of the company completely depends upon on reducing costs further and continuing to preserve the cash. The outlook for transatlantic flying, which is core to Virgin Atlantic’s business, remains uncertain with US-UK travel services being curtailed selectively. The company said that the past six months had been the most challenging times in Virgin Atlantic’s history and that regrettably, the airline must go further one last time with changes at large scale, to ensure it emerges from this crisis. The company added that a 45-day consultation period would begin on Friday with unions. Also in order to try to cut down on crew redundancies, it said it would introduce a company-financed furlough scheme for 600 crew members when the government-backed scheme ends in October 2020.
A tragedy according to pilot unions
Pilots unions like Balpa said that it hoped to avoid pilot redundancies in this process. We cannot deny the fact that every single job that is lost to this crisis is a tragedy and the union is doing everything they can to mitigate job losses across the board as said in a statement issued by Balpa general secretary Brian Strutton.
The union said that the Covid-19 pandemic has taken a dreadful toll on employment in the aviation industry. Most of the Airlines around the world have been hemorrhaging jobs, as they face a dreadful future in which fewer people travel, and fewer planes are able to fly internationally. And it isn’t just the scenario in the airline industry, airports, aerospace firms, and ground handling companies are also being forced to cut jobs in their respective businesses.
The airline company finds itself more prone to losses than many of its rivals because it relies heavily on transatlantic traffic and therefore restrictions on travel to the US remain in force. The company is hoping its £1.2bn rescue plan will enable it to survive the storm. But in order to succeed, it still needs to turn itself into a much smaller business than it was just a few months ago before the onset of the COVID-19 pandemic.
The US carrier Delta Air Lines, which owns nearly 49% of Virgin Atlantic shares, said the rescue plan was in fact an important part of protecting Delta’s position in the United Kingdom, particularly in the critical London Heathrow market as it goes against British Airways and American Airlines. The COVID-19 pandemic has had a severe impact on the entire aviation industry as the imposition of lockdowns and quarantines hit air travel. So all the airports, airlines, and tour firms have collectively shed thousands of jobs.
Virgin Atlantic gained approval for its rescue plan from UK and US courts last week. The CEO of Virgin Atlantic group Shai Weiss said that together they have achieved what many thoughts were impossible and that is down to the efforts and sacrifices of so many people across the company. Focusing on the scenario he called for an urgent government action to introduce passenger testing to help remove all kinds of travel restrictions. Right from the 16 March, it has not been possible for many tourists from the UK to get into the US if they do not have US citizenship particularly.
Skeleton transatlantic services through remainder of 2020
Virgin Atlantic states that it has already restarted skeleton passenger operations within flights to Los Angeles, New York JFK, Hong Kong, Shanghai, Miami, Barbados, and Delhi respectively. Further Service to Tel Aviv will restart today. The company emphasized that while performance has been encouraging, it is still imperative that every sector the airline operates is cash positive. And unfortunately, transatlantic flying represents 70% of the airline’s entire network, and therefore it has been greatly hindered by the presence of travel restrictions and various quarantine policies.
John Strickland, Director of JLS Consulting, said in an interview that the Heathrow slots ensured Virgin’s part in what was normally a very profitable transatlantic market. Although right now that the US market has more or less closed entirely. And on paper, the slots are an asset for the future but at present, it is impossible to define what that future value might actually be. He further said that for all airlines, long-haul flying is still going to be a long time in recovery, with less high-profit margin business travel and a large amount of that capacity is still not coming back. Weiss told the Guardian that the Virgin plan was predicated on as little as 25% of its capacity returning by the end of 2020, and revenues in 2021 to be just half of 2019’s, with the US market, 70% of Virgin’s business, unlikely to reopen fully until next year.