Virgin Australia announces plans to focus on ‘core strengths’ as it ends Tiger Australia.
When Australia re-emerges from its COVID-induced travel coma, it will do so without low-cost carrier Tigerair, after the Virgin Australia group announced it was discontinuing the brand on Wednesday. And budget aurfares may be a further casualty.
As part of a statement to the Australian Stock Exchange, Virgin also announced that it was cutting around 3000 jobs as part of a new plan to “focus on key strengths” and “re-establish itself as an iconic Australian airline”.
The Virgin statement said the decision to discontinue the Tigerair brand was made because of insufficient customer demand to support two brands in the current climate.
Importantly, Virgin said that it would retain Tigerair’s Air Operator Certificate, which would allow it to operate an ultra-low-cost carrier in future when the domestic market could support it.
Monash Business School Professor Greg Bamber told The New Daily that airfares were likely to rise as carriers struggled to bring in customers after pandemic restrictions eased. Health concerns would also be a factor.
“Planes are going to be less full, which means fares are going to be higher,” he said.
“The countervailing argument is that airlines will lower their costs because they only make money when they’re transporting passengers – airports are very expensive car parks.
“But on balance, I think we’re going to see them [fares] hit higher levels in the medium-term future, because airlines have lost so much money and they’ll be trying to recoup those losses.”
New Virgin owners Bain Capital have wasted no time making changes, with the cuts set to make a third of its workforce redundant.
Part of the focus is on Virgin’s domestic and short-haul international business, but the group also makes it clear that long-haul international flying will be an important part of its plan when the global travel market recovers from COVID-enforced restrictions.
Virgin Australia chief executive Paul Scurrah said the announcement would secure approximately 6000 jobs at Virgin and allow for the airline to re-establish itself in the marketplace.
“Our aviation and tourism sectors face continued uncertainty in the face of COVID-19 with many Australian airports recording passenger numbers less than 3 per cent of last year and ongoing changes to government travel restrictions,” Mr Scurrah said.
“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.
“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 to 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.
“Working with Bain Capital, we will accelerate our plan to deliver a strong future in a challenging domestic and global aviation market.”
Mr Scurrah said it was hoped that in time, when things started to return to normal, Virgin would be in a position to re-employ many of its staff that have had to be made redundant.
The president of the Virgin Independent Pilots Association (VIPA), John Lyons, said it was a devastating day for pilots and blamed the federal government for a lack of support.
“The federal government has let down these Virgin employees and the Australian aviation industry as a whole by not providing specific support, as well as the travelling public – this is the exact opposite action that governments in the US, UK and Europe have taken,” Mr Lyons said.
“Given the specialist nature of these roles, our workers’ skills are not easily transferable and take years to secure, so they dedicate their careers to these jobs.
“This is devastating news for them, but also very sad news for the Australian public at large who will undoubtedly see an increase in fares and decrease in services as a result.”
For regular Virgin customers, the group also announced that all travel credits and Velocity Frequent Flyer points will be carried forward under the new ownership.
Also, for Virgin customers with credits for bookings made prior to administration booking dates will be extended to 31 July 2022 for travel until 30 June 2023.
Any Tigerair customers affected by any cancellations will be provided a travel credit for use on Virgin Australia operated services.
Have you ever flown with Tigerair? Will you miss this service when travel returns to normal? Do you think Australians will pay more or flights in the post-COVID world?
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