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Restructuring Virgin Australia to shed wide-body jets, shrink to an all-Boeing 737 airline

Aug. 05, 2020
4 min read
Government Announces Funding Package For Airlines To Continue Operating Limited Domestic Network
Restructuring Virgin Australia to shed wide-body jets, shrink to an all-Boeing 737 airline
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Virgin Australia plans to emerge from administration as a stronger airline, one that centers on its fleet of Boeing 737s and drops long-haul flights to Los Angeles and Tokyo.

The Brisbane-based carrier will prune its more fleet of more than 130 planes to just about around 75 Boeing 737s and will shrink its network to include only domestic Australia and short-haul international routes, Virgin Australia said Wednesday. It will also keep some of its 12 lounges in "key domestic locations."

In addition, Virgin Australia will invest in a "digital re-platforming" of its Velocity Frequent Flyer program. All travel credits and points will be continue to be honored.

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“Our initial focus will be on investing in the core Virgin Australia domestic and short-haul international operation alongside our 10-million-member strong Velocity Frequent Flyer program, continuing to offer an extensive network of destinations, a domestic lounge network and value for money for customers," said Virgin Australia CEO Paul Scurrah.

The plan comes more than three months after Virgin Australia entered administration, which is Australia's equivalent to bankruptcy restructuring. U.S. private equity firm Bain Capital won an auction for the airline in June with a vow to recapitalize the ailing carrier.

Virgin Australia was the first major airline to succumb to the coronavirus pandemic. While already in a weak state before the pandemic, the carrier was unable to continue operations outside of administration without government support -- something the Australian government did not provide.

Since April, Aeromexico, Avianca and LATAM Airlines are among the larger global airline brands that have joined Virgin Australia restructuring under court supervision.

Related: Virgin Australia goes bust, becomes largest airline coronavirus casualty

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Gone in Virgin Australia's restructuring are its wide-body jets, including six Airbus A330-200s and five Boeing 777-300ERs. The jets flew flagship long-haul routes to Hong Kong (HKG) and Los Angeles (LAX) -- where the carrier connected with partner Delta Air Lines -- as well as longer domestic routes to Perth (PER) from Australia's East Coast, according to Cirium schedules.

Hong Kong flights ended in March. New service to Tokyo Haneda (HND) was expected to replace it that month under the company's pre-pandemic plans.

In its restructuring plan, Virgin Australia called Los Angeles and Tokyo services an "important part" of its business and said it intends to resume flights when "sufficient demand returns." However, it also says it does not expect global air travel to recover for at least three years -- nor does it say what jets it would use to fly to either city after the removal of the A330s and 777s.

TPG archives: Take a look inside Virgin Australia’s new Boeing 777 business class

More on the restructuring: What could the new Virgin Australia look like?

Virgin Australia will also remove its 14 ATR 72 turboprops and the remaining Airbus A320s at its Tigerair low-cost unit, which will be permanently closed. The airline will keep a select number of A320s and Fokker 100s in its regional and charter fleet.

The carrier's restructuring will also see roughly 3,000 staff made redundant as it cuts costs.

Virgin Australia did not comment about the future of its global partnerships, including with Delta. The Atlanta-based airline resumed flights to Sydney in July.

The restructuring plan still must be approved by creditors.

Related: Global air travel unlikely to recover until 2024 as COVID remains ‘issue’ in US, elsewhere

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