Virgin Australia Group (VAH) will end widebody operations and will shutter its Tigerair Australia (Melbourne Tullamarine) low-cost subsidiary under a wide-ranging restructuring plan put in place as the firm prepares to emerge from bankruptcy protection.
Under tentative new owners Bain Capital, VAH said it would overhaul its cost base, and simplify everything, starting with its fleet where a more homogenous make-up will result in greater cost efficiencies while removing operational complexity.
"Our initial focus will be on investing in the core Virgin Australia domestic and short-haul international operation alongside our 10-million-member strong Velocity Frequent Flyer program, continuing to offer an extensive network of destinations, a domestic lounge network and value for money for customers," Chief Executive Paul Scurrah said.
The ch-aviation fleets module shows the VAH portfolio of airlines entails Virgin Australia (VA, Brisbane International) which currently operates seven ATR72-600s, two B737-700s, and sixty-two B737-800s while Virgin Australia Regional (VA, Perth International) operates six A320-200s and thirteen F100s. Collectively, this combined fleet is flown for Virgin Australia International (VA, Brisbane International) which itself operates six A330-200s, fifteen B737-800s, and five B777-300ERs. Tigerair's fleet entails eight A320-200s and six B737-800s.
VAH will therefore simplify its mainline fleet to a single type - the B737-800 - while removing its ATR - Avions de Transport Régional, B777, A330, and Tigerair's A320 Family types. However, while VAH’s regional and charter fleet will remain, it will review Virgin Australia Regional Airlines' (VARA) options, including different operating models to support continued regional and charter flying.
Most of the aircraft slated for retirement are dry-leased: the ATRs from Avation (four) and Chorus Aviation Capital (three), and the A330s from ORIX Aviation (two), Global Knafaim Leasing, Doric Asset Finance, Avolon, and Commonwealth Bank of Australia (one each). One B777 is dry-leased from Aviator Capital, while the remaining four are owned by Virgin Australia.
The Tigerair brand will be discontinued as according to VAH, there is insufficient customer demand to support two brands at this time. However, the LCC's Air Operator's Certificate (AOC) and the resources necessary to support it will be retained should the opportunity for an ultra-low-cost carrier arise in the Australian domestic market in future.
Virgin Australia also has firm orders for fifteen B737-8s and twenty-five B737-10s.
In tandem with the reduction in capacity, Virgin Australia will suspend its longhaul network - Los Angeles International and Tokyo Haneda - until global demand recovers. Access to international markets will be retained through the airline’s codeshare partners.
Overall, VAH will cut around 3,000 out of 9,000 existing jobs but is hopeful it will be able to return to a headcount of around 8,000 once the market eventually recovers. Other costcutting measures include supplier contract reviews including products, services, and facilities to better align with the company’s future size and requirements and to lower costs significantly.
The plan, which is backed by VAH's administrators, Deloitte, and Bain Capital will form part of a Deed of Company Arrangement (DOCA) and has yet to be approved by the airline's creditors as the airline progresses out of voluntary administration.
The Australian Financial Review has disclosed that Deloitte has asked Virgin's creditor representative group, the Creditors Committee of Inspection, to defer a second creditors meeting to September 4 in order to give it more time to prepare pre-meeting reports.
A confidential document seen by AFR's Street Talk said Deloitte had argued that the delay would also allow creditors more time to consider information ahead of their vote on Bain's recapitalisation proposal which Deloitte has endorsed.
It also said delaying the meeting would make it less likely that creditors would vote to adjourn the meeting at a later date, to give them more time to work through the deal's details.
Deloitte unveiled Bain Capital as the winning bidder for VAH back in June. The carrier holding entered into administration in April amid debts of AUD6.9 billion (USD4.39 billion).
Meanwhile, the Australian domestic market, already battling weak demand, is set to suffer a new setback as the Queensland state government has decided to close its border to all arrivals from New South Wales and the Australian Capital Territory as of August 8, 2020, due to spiralling numbers of new COVID-19 cases. Queensland has already closed its borders to travellers from Victoria and parts of NSW, including the Sydney metro area. The border between NSW and Victoria also remains closed.
