Virgin Atlantic is to axe up to a third of its workforce as it battles to secure new funding that would enable it to survive the coronavirus pandemic.
Sky News has learnt that the airline majority-owned by Sir Richard Branson’s Virgin Group is to cut just over 3,000 jobs in a move that will spell the end of its long-running operations at London’s Gatwick Airport.
Trade unions and staff were briefed on the redundancies on Tuesday lunchtime ahead of the official announcement.
The statement confirmed that Virgin’s seven Boeing 747s were to be retired as the airline’s fleet is reduced from 43 planes to 36.
Its landing slots at Gatwick were to be retained, the company said, in case future demand allowed its operations to resume.
But a total of 3,150 jobs are at risk across the group.
Virgin said its plans were designed to reshape and resize (the) business to ensure that is it fit for the future, in response to the severe impact of the COVID-19 pandemic on the global economy, our nation and the travel and aviation industry.
The restructuring of Virgin Atlantic’s workforce will follow a week of brutal job losses across Britain’s aviation industry.
The Financial Times reported on Friday that Rolls Royce Holdings, the aircraft engine manufacturer, would reduce its UK workforce by about 8,000 people amid expectations of a protracted slump in demand because of the COVID-19 crisis.
Virgin Atlantic’s restructuring appeared to be pitched by the airline’s management as an important step towards securing hundreds of millions of pounds of new funding from private investors or the government.
Chief executive Shai Weiss told staff that any potential investor, including the Treasury expects us to have taken all possible self-help measures as a pre-condition to funding.
The company has argued that it provides essential competition to BA, and is likely to hold out an olive branch to staff that an eventual recovery in the airline industry’s fortunes could pave the way for future expansion.
The re-focusing of operations on Heathrow and Manchester airports is a major blow to Gatwick, which was notified last week that BA might never resume flying from London’s second-busiest airport.
Virgin Atlantic is anticipating that customer demand will be at least 40% lower during 2020, with only a gradual recovery next year.
The Treasury has, to date, been lukewarm about the idea of committing taxpayers’ money to Virgin Atlantic, partly because of its ownership by billionaire Sir Richard and Delta Air Lines, a US carrier which has itself just been bailed out by Washington.
Sir Richard made an impassioned defence of his group’s financial affairs last month, warning that the transatlantic airline he founded in the 1980s was likely to collapse without government support.
He has already seen Virgin Australia fall into a process called voluntary administration, putting thousands of jobs at risk.
Sir Richard has been seeking hundreds of millions of pounds in the form of a commercial loan, as well as a government guarantee on further sums owed to it by credit card companies.
Talks with private investors also include other forms of financing that could dilute the tycoon’s 51% stake.
In April, Sky News revealed that Heathrow Airport and some of the aviation industry’s biggest manufacturers were mounting a frantic lobbying campaign to secure taxpayer support for Virgin Atlantic.
In one of the letters, John Harrison, general counsel and UK chairman of Airbus, warned that Virgin Atlantic’s collapse could have an extremely negative impact on the A330 [aircraft manufacturing] programme.
As you will be aware, all wings for these aircraft are designed and manufactured in the UK, and orders from airlines like Virgin are vital for the continuation of our business, Mr Harrison wrote.
The pleas from industry stakeholders underlined the extent to which Virgin Atlantic regards the coronavirus pandemic as an existential threat.
The company, which recently received a capital injection amounting to more than $100m from Virgin Group, has furloughed thousands of staff and seen its top executives agree substantial pay cuts because of the COVID-19 outbreak.
Less than a handful of Virgin Atlantic’s planes have been flying since the UK lockdown began in March, when Peter Norris, Virgin Group’s chairman, urged Boris Johnson to establish an industry-wide support package that could cost in the region of £7.5bn.
Hopes in the airline industry that such a rescue plan might be forthcoming appeared to be dashed, however, when Rishi Sunak, the chancellor, indicated that state aid would be available only as a last resort and after the support of existing government schemes and companies’ existing shareholders had been pursued.
He added that help would only be afforded to companies which had demonstrated their value to the wider UK economy and to competition in the aviation sector.
Despite his long-stated antipathy to government rescues of airlines, Willie Walsh, the chief executive of BA’s parent, International Airlines Group, sanctioned a €1bn state-backed loan for its Spanish airlines.
Virgin Atlantic said it continued to explore every funding option, including with the government.
Mr Weiss, the airline’s chief executive, said: We have weathered many storms since our first flight 36 years ago, but none has been as devastating as COVID-19 and the associated loss of life and livelihood for so many.
The pilots’ union, BALPA, said 426 pilots were at risk of losing their jobs with Virgin.
Its general secretary, Brian Strutton, added: This is another terrible blow for the industry and is evidence of the dire situation facing UK aviation.
Without immediate action by the government we will see the once world leading industry decimated.