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Virgin Australia (ASX:VAH) - Managing Director & CEO, Paul Scurrah
Managing Director & CEO, Paul Scurrah
Sourced: Travel Weekly
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  • Virgin Australia (VAH) has made substantial adjustments to its financial outlook, flight capacities and procedures
  • Cost-cutting measures including salary & bonus reductions, and marketing & capital expenditure decreases underpin the strategy
  • However, Virgin’s cash and debt positions remain strong
  • Both domestic and international flights will be reduced due to decreased demand and the company will waive fees for customers adjusting travel plans
  • Hygiene and cleaning procedures will be upgraded
  • Virgin Australia closed 31.7 per cent up on Friday, with shares trading for 7.9 cents a piece

Virgin Australia (VAH) today announced additional reductions in capacity and cost measures to address the impact of covid-19.

As a predominately domestic airline, Virgin is insulated from some of the broader international impacts – the group’s domestic operations account for 88 per cent of passengers and 78 per cent of flight revenue.

However, the group is taking action to reduce capacity in the international markets it operates in and reduce domestic capacity in line with weakened demand in certain markets.

Update on financial position

The Group is suspending earnings guidance for the 2020 financial year due to ongoing uncertainty of the covid-19 situation.

Virgin currently has a cash position in excess of $1 billion, with no significant debt maturities until October 2021 and no new aircraft deliveries until July 2021.

Continued focus on cost reduction

In order to cut costs, Virgin is installing a raft of measures across the entire business platform.

There’ll be a temporary reduction in Chairman and Independent Board Director fees by 15 per cent, a removal of management bonuses, and no base salary increases for non-EA team members.

Virgin will also seek relief on government charges, a decrease in marketing spend, a stop on all discretionary spending and non-critical capital expenditure and a targeted reduction in hotel accommodation charges.

Domestic changes

Across the Group, domestic capacity will be cut by five per cent for the second half of 2020, driven by a reduction of seven per cent in Q4.

This is an increase on the three per cent reduction previously announced on February 26 due to continued market softness and decreased demand and forward bookings.

Services that will be reduced are mainly on routes that have multiple daily flights thus minimising disruption to guests.

International changes

In response to a decrease in international forward bookings, Virgin will reduce international capacity by eight per cent in the second half of 2020 to meet current and expected demand.

The international changes announced today follow the group’s recent withdrawal from Hong Kong services.

Affected routes include Los Angeles, Japan, and Trans-Tasman services. Virgin will continue to assess any impact from covid-19 and respond with relevant changes as conditions evolve.

Advice for guests

While the overall risk in Australia of contracting covid-19 in the community remains low, Virgin says it will continue to maintain high health and safety standards for all guests and crew. As an extra precaution, it has also recently implemented additional hygiene measures in the air and on the ground.

There is also a new policy available for guests wishing to change their travel. New or existing international bookings through to June 30, 2020 will be flexible on dates and destinations, without incurring any change fees. Guests with any changes to their bookings will be contacted directly with alternative travel arrangements -including refunds – for any routes that Virgin is no longer servicing.

Virgin Australia closed 31.7 per cent up on Friday, with shares trading for 7.9 cents a piece.

VAH by the numbers
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