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Virgin Australia plans to shed staff under new US owners

CANBERRA, Australia – Virgin Australia plans to scale down its operations under new U.S. owners and shed a third of its staff as the carrier adjusts to the pandemic, the nation´s second-largest airline said on Wednesday.

The Brisbane-based company in April became the world´s largest airline to seek bankruptcy protection after the coronavirus pandemic virtually grounded the aviation industry.

Virgin´s administrator Deloitte´s has entered into a binding agreement to sell the airline to the Boston-based investment firm Bain Capital. The deal will go within weeks for final approval to a meeting of Virgin creditors who are owed 7 billion Australian dollars ($5 billion).

The Virgin Australia Group chief executive and managing director Paul Scurrah announced plans to cut 3,000 jobs plus long-haul flights from Australia to Los Angeles and Tokyo to try to reset the business for lower global demand.

The domestic and short-haul international fleet would become all Boeing 737s, except for regional and charter aircraft. Boeing 777s and Airbus A330s would be shed.

Virgin´s budget subsidiary Tigerair Australia would be discontinued, as would its Airbus A320s.

“Demand for domestic and short-haul international travel is likely to take at least three years to return to pre-COVID-19 levels, with the real chance it could be longer, which means as a business we must make changes to ensure the Virgin Australia Group is successful in this new world,” Scurrah said in a statement.

While the workforce would be slashed to 6,000, the airline hopes to build back up to 8,000 staff as the aviation market recovers.

Backed by Bain Capital, with more than $100 billion assets under management, Virgin Australia would have “a strong balance sheet to withstand material future shocks to the industry,” Scurrah said.

Virgin Australia´s major shareholders are Singapore Airlines and Etihad Airways and Chinese investment conglomerates Nanshan Group and HNA Group. Its British billionaire founder Richard Branson holds a 10% stake.

The airline sought bankruptcy protection after the Australian government refused its request for a AU$1.4 billion ($1 billion) loan.

Australia´s Treasurer Josh Frydenberg told reporters at the time his “government was not going to bail out five large foreign shareholders with deep pockets who together own 90% of this airline.”

Rival Qantas Airways argued that it had three times more revenue than Virgin and was therefore entitled to a AU$4.2 billion ($3 billion) loan if the smaller airline was not to gain an unfair advantage.

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