After seven consecutive years of annual losses, Virgin Australia is cutting staff and plans to cuts routes as well.
Virgin Australia, founded in 2000, last posted an annual profit in 2012. In the last seven years it has updated its fleet, launched a successful loyalty program, increased total passengers, and increased total revenue. Yet it has managed to lose over USD 1 billion in the process.
Its recently-reported A$349.1 million ($236 million) loss in 2018 has again forced to beleaguered carrier to wrestle with its strategy and wonder about its future. As a first step, Virgin Australia will cut 750 office positions, about 8% of total staff. It will also embark upon an operational review which will reassess the fleet and route map, leading to reductions in domestic and international service.
Stop and realize what a unique airline Virgin Australia is. Not so much due to its route map, onboard service, or fleet, but due to its ownership. The airline is owned by a mix of actors including China’s HNA Group, Etihad Airways, the Virgin Group, Singapore Airlines, and Nanshan Group, another Chinese conglomerate. The Nanshan Group owns the highest stake…at 22.4%. With no entity having majority control, any change represents a compromise among competing interests.
I certainly would not argue Virgin Australia is a lost cause. It offers an excellent onboard product that I would unhesitatingly recommend after a recent trip to Bali via Brisbane. But Virgin Australia is not like Virgin America, which posted losses for nine years in row, but then finally became profitable (and later sold to Alaska Airlines). Virgin Australia has experience the taste of profit only to lose it…and continue to fall short.
Hopefully Virgin Australia will realize, even as it faces mounting losses, that it cannot cut its way to long-term growth. On the short term, however, perhaps cutting its unprofitable Tigerair Australia budget division and a couple unprofitable Virgin routes is wiser than letting the losses mount up.