Virgin Atlantic is to cut a further 1,150 jobs and put another 600 cabin crew on extended furlough beyond October, despite securing a £1.2bn rescue plan that was signed off by a US court on Thursday night.
Virgin said the job losses, on top of 3,150 already announced since March, were “heartbreaking, but essential” to ensure its survival, with international travel recovering more slowly than expected.
On Thursday, the airline gained court approval for its refinancing package, designed to see it through at least the next 18 months. The package includes a pledge of £200m from Sir Richard Branson’s Virgin Group, the airline’s biggest shareholder, and creditors agreeing to reduce and defer Virgin Atlantic’s debts.
Airbus – 1,700 jobs
30 June: The European planemaker announced plans to cut 15,000 jobs, including 1,700 in the UK, as it warned the coronavirus pandemic had triggered the “gravest crisis” in its history.
Swissport – 4,500 jobs
24 June: Swissport, which handles passenger baggage and cargo for airlines, has begun a consultation process to make 4,556 workers redundant, more than half of its 8,500 UK workforce.
Bombardier – 600 jobs
11 June: The Canadian planemaker will cut 600 jobs in Northern Ireland, as part of 2,500 redundancies announced in June.
Rolls-Royce – 9,000 jobs
3 June: The jet-engine manufacturer has confirmed that 3,000 job cuts, of a planned 9,000 worldwide, will be made in sites in the UK.
easyJet – 4,500 jobs
28 May: The airline has announced plans to cut 4,500 employees, or 30% of its workforce, as it prepared for lower demand.
Tui – 8,000 jobs
13 May: Travel company Tui plans to cut up to 8,000 jobs worldwide in response to the coronavirus chaos engulfing the tourism industry.
Virgin Atlantic – 3,000 jobs
5 May: Richard Branson’s airline is to cut more than 3,000 jobs, more than a third of its workforce, and will shut its operations at Gatwick.
Ryanair – 3,000 jobs
1 May: The Irish airline intends to slash 3,000 roles and reduce staff pay by up to a fifth.
Aer Lingus – 900 jobs
1 May: The Irish flag carrier, part of International Airlines Group (IAG), plans to cut 900 jobs.
British Airways – 12,000 jobs
28 April: The UK flag carrier plans to make up to 12,000 of its staff redundant, a reduction of one in four jobs at the airline, with cabin crew, pilots and ground staff affected.
Meggitt – 1,800 jobs
23 April: British engineering company Meggitt plans to shed about 1,800 jobs making parts for commercial aviation.
Safran – 400 jobs
23 April: French aircraft seat maker Safran made 400 job cuts at its UK operations, including a plant in Cwmbran.
Flybe – 400 jobs
5 March: Flybe, Europe’s largest regional airline, collapsed into administration with the loss of more than 2,000 jobs, less than two months after a government bailout.
The airline will start flights to Pakistan in an attempt to revive business, with its main US routes still largely blocked to international travellers.
Shai Weiss, Virgin Atlantic’s chief executive, said it was a bittersweet day: “Together we have achieved what many thought impossible… The completion of the private-only, solvent recapitalisation of Virgin Atlantic removes much of the uncertainty we faced and represents a major step forward in our fight for survival.”
He added: “After the sacrifices so many of our people have made, further reducing the number of people we employ is heartbreaking, but essential for survival.”
The company will fund its own furlough scheme for the 600 crew from October should the government’s job retention scheme not be extended.
The Unite union said news of more job losses was “a searing indictment of the cavalier way that the government has treated the aviation sector, which is key to the health of the British economy.”
Weiss said it was crucial that passenger tests for Covid-19 were introduced to end travel restrictions and quarantine, while protecting public health. He urged the government to push for trials of a travel corridor to New York, with coronavirus infection rates similar to the UK. “The US is essential to us, and the economic recovery cannot take off without that border opening up. If travel is curtailed next summer, it is not just Virgin Atlantic, it is the country’s problem.”
The refinancing scheme, announced in July after Virgin’s attempts to solicit government help were rebuffed, was rubber-stamped by both UK and US courts this week after creditors voted to accept a 20% haircut and defer repayments from the airline, worth around £450m. The shareholders, Branson’s Virgin Group and US carrier Delta, have also deferred £400m in payments, and credit card companies have agreed to support the deal and keep funds flowing. One new investor, US private equity fund Davidson Kempner, will put in £170m.
Aviation industry analysts said Virgin’s long-term future remained far from clear. Andrew Lobbenberg, of HSBC, said: “They are getting new hard cash of less than £400m which, in the context, isn’t that much. It’s not clear that they have got that much liquidity, and the scale of the challenge is large.”
Although full details of the recapitalisation have not been made public, it is assumed that Davidson Kempner’s investment has been guaranteed against Virgin’s Heathrow landing and departure slots, once valued up to £50m a pair.
John Strickland, of JLS consulting, said the Heathrow slots ensured Virgin’s part in what was normally a very profitable transatlantic market: “But right now that US market has more or less closed. On paper the slots are an asset for the future; but at present it’s impossible to define what that future value might be.
“For all airlines, long-haul flying is going to be a long time in recovery, with less high-profit margin business travel – a large amount of that capacity is not coming back,” he added.
Lobbenberg warned: “This deal looks like it will get Virgin through the winter … but it’s unclear what will happen next year. It’s highly leveraged and has no unencumbered assets. The survival of the business is self-evidently not in their hands – it needs the long-haul market to reopen.”
Weiss told the Guardian that the Virgin plan was predicated on as little as 25% of its capacity returning by the end of 2020, and revenues in 2021 to be just half of 2019’s, with the US market, 70% of Virgin’s business, unlikely to reopen fully until next year.
Weiss said the airline would be less than half its pre-Covid size, with a dramatically lower cost base, and hinted that it would be a more austere outfit than in Branson’s heyday. “The thing that makes Virgin Atlantic is not the glitz and the glamour, it’s the heart and soul,” he said.
