Virgin Atlantic job cuts will help win new investment -internal memo

LONDON (Reuters) – Virgin Atlantic’s planned 3,150 job cuts will show the airline is taking “self-help” measures and help it to win financial support from either the British government or a private sector investor, an internal memo to pilots seen by Reuters said.

Virgin Atlantic said earlier this week that it would lay-off almost a third of its workforce as it battles to stay afloat in the coronavirus pandemic which has brought air travel to a near standstill.

Founder Richard Branson, whose Virgin Group owns 51{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of Virgin Atlantic alongside U.S. airline Delta (DAL.N) with 49{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, said in April the airline will only survive the impact of COVID-19 if it gets financial support from the government, but it is also seeking private investment.

In an internal memo dated May 6 which was addressed “Dear Pilots”, the airline said that it only needed 550 pilots out of about 1,000 currently, and that shedding jobs would help it win new investment.

“In order for us to qualify for financial support from HM Government or the private sector it is critical that we demonstrate that we have taken all self-help measures in a timely fashion so we can secure the funding we need to survive,” the memo said.

When asked about the memo, Virgin, which is in a consultation period with unions over the redundancies, said it continued to explore options for additional funding with the government and private investors.

“Discussions are ongoing and constructive,” a Virgin Atlantic spokesman said on Thursday.

Elsewhere in Europe, the French and Dutch governments have pledged up to 11 billion euros in rescue aid for Air France-KLM (AIRF.PA), while Germany’s Lufthansa (LHAG.DE) is in talks about a bailout. Union and opposition politicians in Britain have called for extra government support for the aviation sector.

Virgin’s internal memo also highlighted that cargo revenues, an extra source of income alongside passenger ticket sales, had become a lifeline for the airline during the pandemic.

Virgin called the cargo-only programme “critical” and said it was helping to protect the airline’s cash position.

The Virgin spokesman said that Virgin was operating more than 90 cargo-only flights per week in May.

Strong cargo demand is also helping Virgin’s bigger rival British Airways-owner IAG (ICAG.L).

“The fact that we’re seeing good, strong cargo demand has enabled us to operate passenger flights that without the cargo would be cash negative,” IAG CEO Willie Walsh told investors on a call earlier on Thursday.

IAG said that demand for cargo was such that it was considering modifying a couple of its Boeing 777 planes. It said that these were aircraft that would be reconfigured in future anyway, so it would remove the seats on some of the planes and fly cargo in the passenger cabin.