Virgin Australia shares fell 6% to 15.6 cents yesterday after the company revealed plans to sack 750 back-office workers over the next 8 months and make every attempt to return to the black as quickly as possible.
Clearly, that won’t be in 2019-20 which looks like becoming its 8th loss-making year in a row.
As well the airline is looking at every route in its network as part of a plan by its new boss Paul Scurrah to cut costs and end the string of losses.
Soft demand and high fuel costs saw Virgin report a $315 million loss for the year ended June 30.
While that was an improvement on the previous year’s $653 million loss, it was still one of its biggest-ever losses.
The airline has now posted seven straight years of losses adding up to $1.9 billion – it is an unedifying string of value destruction and a loss this financial year will take the total past $2 billion.
The company said it would make 750 corporate and head office roles redundant by the end of the financial year (next June) to cut $75 million from its annual wage bill.
The job losses represent about 7.5% of its total workforce, and close to a third of all corporate roles.
As part of the cost-cutting Virgin announced it would overhaul its corporate structure, which Mr. Scurrah said had grown “overly complex over time”.
The day to day running of its three divisions – Virgin Australia, Virgin Australia Regional Airlines and Tigerair – will be combined into a single corporate team.
And there will be fewer flights and planes in the air by the end of this year. Virgin cut capacity by about 1.5% in May and June and yesterday indicated there would be further cuts later in 2019.
Mr. Scurrah, who started in March after predecessor John Boghetti retired said he was “acutely aware” of the impact the job cuts would have on staff but said it was vital the airline must improve its financial performance.
“I regret the need to reduce the size of our workforce so quickly. However, today’s financial results tell us loud and clear that we need to reduce costs,” he said.
“We need to make tough but important decisions that are in the long-term interests of the group.”
The airline said it was reviewing all routes in its network and would make changes that would lower costs and use its aircraft more efficiently.
One of Mr. Scurrah’s first achievements in the top role was to free up cash by delaying delivery of about $2.5 billion of new Boeing 737 MAX jets which remained grounded in the wake of two fatal crashes – one in late 2018 and one in March of this year.
In May, Virgin warned that on an underlying level, which strips out some one-off costs, earnings would fall by at least $100 million and swing to a loss of $35.6 million, or lower.
The underlying result was worse than that at $71.2 million, hence the axe swinging yesterday and in the months to come.
