Virgin Australia: Bidder update – planned job losses

We are down to 2 bidders, and as part of the whinowing process, bidders were asked to outline job losses in their plans for Virgin Australia.

The approximately 9,000 Virgin Australia staff, are the largest group of creditors and therefore form an important block that needs satisfying in this Administration and sale process.

The workers and unions involved are not living in cloud cuckoo land. They know that some job losses will be involved. Presumably its a question of how many now, and what are the prospects for employees in the longer term that will guide this voting block on which bidder they will back.

What are the final bidders plans?

Well, we don’t officially know, but it is thought that both the Bain Capital bid and the one for Cyrus Capital Management intend to return about two-thirds of Virgin Australia’s aircraft back into service. That’s roughly 90 of the current 130 strong fleet.

To effectively compete with Qantas domestically, industry pundits think it will take 80 aircraft. Continuing to run an international operation would also increase the number of planes and staff required.

Staff Cuts

We don’t know what Bain and Cyrus are planning as far as job losses are concerned, but there have been leaks about what excluded bidder BGH was planning. They were looking at around 2,000 staff being terminated, including a bunch at head office.

Virgin has already shed staff as part of Paul Scurrah’s reforms. He announced cuts of about 750, but only implemented around 500 before the airline went into administration. When Tiger Air stopped flying in March, that also said goodbye to around 1,000 jobs, including some at the closed New Zealand base, so we are already down from 9,000 odd, to 7,500 staff.

Sources say that Virgin Management is working on the basis that domestic operations would be back to normal by December, with international operating at about 70% capacity. Those forecasts sound overly optimistic to me, but then what do I know?

2PAXfly Takeout

This is another timely reminder to wear your seatbelt when seated. Holding you close to your seat will protect you from the sort of injuries sustained on this flight, when unsecured passengers flew to the ceiling of the aircraft, and then came crashing down once the ‘drop’ ceased.

The hope will be that this is an anomaly – a ‘freak accident’ in casual parlance. If it is a systemic error either mechanical or electronic, then this is a larger concern for the airlines that fly Boeing Dreamliner 787 aircraft. Let’s hope it isn’t. If it is, it will pile on the woes to Boeing’s existing stack.

It is inevitable as day follows night that there will be some staff cuts at Virgin Australia, whoever wins the race to purchase the airline. The question will be how much does the final bidder value the skills and experience of current staff. Are they willing to keep a few extra on, given the unpredictability of the market in this era of the COVID-19 pandemic?

Unfortunately for current staff, there is always a phalanx of willing wanna-be flight attendants, not to mention those flight staff including pilots and captains already retrenched from other airlines. That does not give them a good bargaining position, and it also strengthens the position of the new owners.

In that light, I would expect job cuts to be as severe as the new owners can make them, to drive the economics of the renewed Virgin Australia. I wish it were otherwise.