Virgin Atlantic axes 3,000 jobs and leaves Gatwick in battle for survival

Virgin Atlantic

Virgin Atlantic has announced that it 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.

The airline majority-owned by Sir Richard Branson’s Virgin Group has announced that it is cutting 3,150 jobs in a move that will spell the end of its long-running operations at London’s Gatwick Airport.

Trade unions and staff were being briefed on the redundancies on Tuesday lunchtime, with an external announcement expected imminently, according to one official.

The restructuring of Virgin Atlantic’s workforce will follow a week of brutal job losses across Britain’s aviation industry.

British Airways has begun consulting on up to 12,000 redundancies, while Ryanair has said it plans to axe 3,000 jobs.

As we reported on Friday, 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 is likely 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, according to one union source.

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.

One source said that Virgin Atlantic’s announcement would include the disclosure that it was refocusing its operations on Heathrow and Manchester airports.

That would represent 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.

Fewer 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 declined to comment, although it recently denied reports that its discussions with government had faltered, saying they were “ongoing” and that the company’s “cash position remains stable”.