Cash-strapped airline to lift domestic flights
ROBYN IRONSIDE
Virgin Australia is not giving up its domestic market share without a fight, stacking on capacity to match larger rival Qantas as travel restrictions ease.
Despite a precarious financial position as the airline navigates administration, Virgin Australia will increase services to 320 a week by early July, from just 76 currently.
It’s understood management is hopeful the flights will generate much needed revenue, with existing cash reserves not expected to last past August.
Virgin Australian entered administration on April 21 with debts of $6.8bn, and was left with about $100m in May.
Group chief commercial officer John MacLeod said more services and frequencies were being added in response to returning demand for air travel.
“By early July, we will have gradually added approximately 30,000 seats across 320 flights per week to our schedule — more than doubling our capacity and providing more flexibility for guests,” Mr MacLeod said.
“It’s early days, but these services will be a welcomed boost to Australia’s tourism industry and help the nation’s economy and aviation sector to rebuild.”
He said the services would also allow the airline to bring back to work some of the 8200 employees currently stood down.
Virgin’s announcement came as credit ratings agency Moody’s forecast Qantas’s earnings and credit metrics would recover from the COVID-19 crisis before other global carriers.
Moody’s cited a number of reasons for its optimism, including Qantas’s strong balance sheet prior to the pandemic and the fact Qantas’ main competitor was in administration.
“As Qantas ramps up capacity from July, we expect ongoing uncertainty related to Virgin to benefit Qantas, improving cash flow and profitability,” said the Moody’s report by vice-president and senior credit officer Ian Chitterer and associate analyst David Xu. Other factors included Australia and NZ’s success in controlling the coronavirus outbreak and the strength of Qantas’s domestic business and loyalty program, accounting for up to 80 per cent of earnings.
The report said the re-emergence of trans-Tasman travel in September also provided significant opportunity for Qantas to increase yields, in the absence of capacity and competition.
“There is uncertainty as to if and when Virgin Australia will resume flights and to what extent it will participate in trans-Tasman routes,” it said. “All of this should be supportive of yields at least until the end of the key December-January holiday season.”
The ramp-up of domestic flying by Qantas and Virgin will coincide with a range of new measures designed to enhance passenger safety and wellbeing, before, during and after flights.
From Friday, passengers should expect more sanitiser stations at airports, and the provision of masks and antibacterial wipes on board aircraft.
Virgin Australia will ask passengers to fill out a health questionnaire at check-in, to ensure they are fit to fly, and to help with contact tracing.
Both airlines have stressed that the risk of viral transmission on aircraft is very low due to the hospital-grade air filters and high seat backs. While Qantas will not exercise social distancing in the cabin, Virgin’s group medical officer Dr Sara Souter said it would try to space passengers out as much as possible.
Business Review
Cash-strapped airline to lift domestic flights