Virgin Australia to ditch routes ‘entirely’

 

FOLLOWING a week of lows for Australia's second largest airline, the CEO of Virgin Australia says it is a step closer to putting poor-performing flight routes on the chopping block.

Last week, the embattled airline announced another year of "disappointing" full-year results, with a loss of $349.1 million. It was the seventh consecutive year of losses for the embattled airline - increasing fuel prices and foreign currency their biggest headwinds.

Virgin Australia's CEO Paul Scurrah says all flight routes will be reviewed. Picture: Jeremy Piper
Virgin Australia's CEO Paul Scurrah says all flight routes will be reviewed. Picture: Jeremy Piper

In a bid to claw back bleeding dollars, Mr Scurrah said Virgin would review every flight route on its network, as well as cut 750 jobs, as part of a drastic restructure.

Mr Scurrah said the massive employee cull was set to save the airline $75 million by the end of the 2020 financial year, while the flight path review would allow the airline to focus more on routes that were financial viable.

But which flight paths would see the door first?

At the launch of the airline's newest offering, My Lounge at Brisbane International Airport, Mr Scurrah told news.com.au while the review was still in the early stages, certain problematic paths stuck out a little more than others.

"What I saw coming in (to the job as CEO) was some headwinds that were pretty strong," he told news.com.au.

Mr Scurrah says 750 jobs from the corporate office will go by 2020.
Mr Scurrah says 750 jobs from the corporate office will go by 2020.

"Those headwinds related to fuel, as there's been hundreds of millions of dollars in additional fuel costs burdened on to Virgin Australia Airlines in the last couple of years and foreign exchange, which is in a pretty weak position right now as well.

"Every route is under review, however one of the things I am keen to do is wait until John MacLeod, our new chief commercial officer, is here to validate some of the reviews under his experience.

"I am going to be holding John accountable for the revenue performance, the network planning and the capacity management of the organisation, so it's important he has a say in what we do."

Mr Scurrah remained tight-lipped on which paths would face the chopping block, but he believed some routes would be pulled entirely from Virgin's flight network.

"We have made good progress in where we will continue to fly," he said.

"You will see us pull out of some routes … some entirely. I'm not going to sugar-coat that. We will be making some of those decisions.

"There are spots in our international offering that are going really well, the USA in particular is doing very well.

"We will have to take another look at Hong Kong given the disruption that's happening there as a destination.

"But we are focused on routes we have used for some time that have made money (across both domestic and international)."

Despite the changes, Mr Scurrah (centre) says the Virgin brand is as strong as ever. Picture: AAP Image/Dean Lewins.
Despite the changes, Mr Scurrah (centre) says the Virgin brand is as strong as ever. Picture: AAP Image/Dean Lewins.

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Mr Scurrah, who said after seven years of losses for the airline it was crucial for him to make drastic changes to the brand, said the review would not impact airfare prices for consumers.

"We will have a look at routes in the domestic market that don't make sense for us to be flying anymore," he noted of the review.

"We will look at frequency of our short-haul international offering to make sure we have the capacity and frequency right.

"People will see a more measured approach to capacity management more so than to route cuts.

Routes to Hong Kong will be reviewed, especially under the current political climate. Picture: AAP Image/David Mariuz.
Routes to Hong Kong will be reviewed, especially under the current political climate. Picture: AAP Image/David Mariuz.

"But Virgin needs to live within their means. We need to make sure our cost base is in tune with our revenue and make sure we are not over-investing."

Some critics have questioned the brand direction of the airline, which launched in Australia in 2000, and whether its focus had become too aligned with the offerings available at competitor airline, Qantas.

But Mr Scurrah was quick to quash any such correlation, insisting the Virgin brand and rapport with consumers was stronger than ever.

"It's our goal and proven we are in this space already … to be the best value airline to our corporate customers and to our leisure customers as well," he said. "We are that now … and I will be doing nothing to change that.

"No matter what happens, we will still see the discounted tickets in the market today. We will just balance that mix to be getting the higher yielding front-end of the plane filled so we can make money.

Mr Scurrah says Virgin is not trying to ‘become Qantas’ and his its own personality. Picture: AAP Image/David Mariuz
Mr Scurrah says Virgin is not trying to ‘become Qantas’ and his its own personality. Picture: AAP Image/David Mariuz

"Virgin as a brand is one of the strongest you'd want to work with. It allows us to compete head-to-head with Qantas in the markets and routes that we do compete.

"I do, however, want to make sure that we reinforce to have our own personality as an airline and our own uniqueness.

"I am aware of the criticism that we have tried to become Qantas, and I don't buy into that. I am keen for people to book us for the reasons we are different and not for the reasons we are the same, and that's where we will go going forward."



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