Virgin Australia has announced it will axe 750 jobs after posting a seventh consecutive full-year loss.
The group posted a loss of $315.4 million for the 12 months to 30 June 2019 – admittedly an improvement from its $653.3 million loss in FY18, but still not good news.
Virgin Australia’s earnings before interest, taxes, depreciation and amortisation fell 17 per cent last financial year to $460.8 million, while overall revenue rose eight per cent to $5.8 billion.
Profit attributable to Virgin’s domestic operations fell 10 per cent to $437 million, while earnings from international operations swung from a $10.1 million profit in FY18 to a $58.3 million loss in FY19.
Tigerair recorded a $4.8 million loss in earnings, down from $10.9 million in FY18, while its Velocity Frequent Flyer business – which is set to lose co-investor Affinity Equity Partners – saw 13 per cent earnings growth to $132.4 million.
Virgin Australia group has announced it will cut 750 roles, largely corporate and head office positions, to combat its financial woes.
The company hopes the reduction in workforce will deliver cost savings of $75 million per annum, and it’s anticipated that the majority of affected team members will leave the business by the end of the next financial year.
The new group organisational structure will integrate the corporate, operational and commercial functions of Virgin Australia Airlines, Virgin Australia Regional Airlines and Tigerair Australia into single functions and points of accountability.
As a result of the restructure, Keith Neate has been appointed as Virgin Australia’s chief financial officer, Stuart Aggs has been named as the permanent chief operations officer after acting in the role since May, and John MacLeod has come onboard as chief commercial officer.
The group is also looking to fill the newly-created role of chief strategy and technology officer.
Virgin Australia group CEO Paul Scurrah said the results were disappointing and underscored the need for change.
“There is no doubt that we are operating in a tough operating climate with high fuel, a low Australian dollar and subdued trading conditions,” he said.
“However, today’s results show that we must improve our financial performance.
“While we have continued to grow revenue and have a strong, loyal customer base, we need to make changes to our costs to ensure we see financial benefit from the growth in our business.
“Today, we have announced a number of changes to help drive business improvement. This includes a restructure of our leadership team to take in groupwide accountability across all brands, a reduction of 750 roles from our workforce, a review of all supplier contracts and agreements, and a fleet and network review which will see a tight focus on capacity management going forward.
Scurrah noted that Virgin had already addressed a number of other business priorities, including the restructure of its Boeing 737 MAX order, which he said deferred a significant amount of capital expenditure.
The airline CEO also said he was “acutely aware” of the impact that the job cuts will have on Virgin’s team.
“However, if we are to position this business for the future, create new opportunities, improve competitiveness, and continue to deliver for our customers, we need to make tough but important decisions that are in the long-term interests of the group,” Scurrah said.
“These are just some of the strategic decisions that have been made to help in the short term. However, there’s more work we need to do on the long-term focus and the positioning of the business.
“We will be focused on being the best value airline for both the corporate and leisure traveller, offering the strong and unique Virgin experience and proposition that we know will appeal to all market segments.
“As I’ve said previously, [the] key to our success is ensuring we strike the right balance between the interest of our team members, customers and our shareholders. We’ll be focused on delivering for all three groups.”