Virgin cuts capacity in sweeping network review

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November 06, 2019
Virgin network review

Virgin Australia is suspending its Melbourne-Hong Kong service and axing routes to Christchurch and Perth as part of a sweeping review of its network and fleet.

Australia’s second-biggest airline plans to reduce domestic capacity by at least two percent in the second half of the 2020 financial year compared to a year ago, a move that will put upward pressure on fares.

The reduction includes retiring three Fokker F100 jets by March, 2020, and reducing Tigerair Australia’s fleet by two aircraft by the middle of next year.

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Among the Virgin mainline routes to go: Canberra-Perth from December 6, Gold Coast-Perth from January 19 and Sydney-Christchurch from April 29.

They will be joined by Tigerair routes between Brisbane and Darwin (from February 3) as well as Proserpine-Sydney (from February 3) and Adelaide-Brisbane (March 29).

Flying on the Melbourne-Hong Kong route will stop from February 11 but the airline will continue to serve the troubled city with a daily service from Sydney and connect with partners Virgin Atlantic and Hong Kong Airlines.

The Airbus A330 currently operating the Melbourne-Hong Kong route will be redeployed on the carrier’s new Brisbane Tokyo-Haneda flights starting March 29.

The airline also plans to re-enter the Melbourne-Denpasar route from March 29. An application to the International Air Services Commissions suggest it is planning five services a week using a Boeing 737-800.

Virgin Australia Group chief executive Paul Scurrah said the changes were about disciplined capacity management and putting the right product on the right route.

He noted there were many instances where the group has Tigerair and Virgin services on the same route at the same time.

He said it was looking to focus Virgin on routes that have a business and leisure orientation and Tigerair on key holiday destinations.

“We maintain a strong network of destinations and it’s important that our schedule continues to reflect demand from our business and leisure customers,’’ he said.

“Some of today’s changes respond to shifting demand on some routes, and others are about refocussing Virgin Australia and Tigerair Australia on the destinations we feel they are best suited.”

Scurrah said demand on the Hong Kong route had “declined in line with the political landscape” and management believed it was now best served by a single service from Sydney.

He predicted there would be strong demand on the new Tokyo route.

He told the company’s annual meeting that the airline was seeing a continued softness in the domestic market, which is Virgin’s major focus, compared to a robust first half last year.

“However, we are continuing to manage capacity very tightly,” he said. “We are ensuring we are meeting market demand with the right capacity.

“We’ll continue to watch that with laser focus to ensure we keep the cost down during a challenging period.”

Schedule changes include a reduction in Auckland-Sydney flying from 19 return services a week to 14 but mainline aircraft will replace Tigerair’s Adelaide-Brisbane flights with five services a week.

On regional routes, the group will cut ATR turboprop aircraft services between Sydney and NSW regional center Tamworth from double daily to six weekly services but plans to add four services per week to its Sydney-Port Macquarie service.

The announcement said Tigerair would increase its focus on the domestic leisure market retaining “a competitive proposition” in the Sydney-Melbourne-Brisbane triangle.

“Tigerair Australia will also continue to be focussed on transitioning to a single fleet type of Boeing 737s and will reduce its fleet by two aircraft with the removal of two Airbus A320 aircraft by mid-2020,” it said.

Virgin announced the fleet and network review in August along with moves to cut about 750 jobs and restructure its management.

The moves came after it reported an underlying loss before tax of $A71.2 million in the 2018-19 financial year and a statutory loss of $A315.4 million.

Virgin chairman Elizabeth Bryant told the company’s annual meeting Wednesday the appointment of Scurrah was critical to stemming losses at the airline and he had a proven record of driving profitability.

“We set him a clear mandate to return the company to a profitable position and the board is very pleased with his early decisions,” she said.