Richard Branson, founder of the Virgin empire, once said that the quickest way to become a millionaire was to start as a billionaire, “and then launch an airline”.
And now his airline – like many around the globe – is in trouble again.
Some 3,150 workers will lose their jobs if the London-based Virgin Atlantic carries out its plan to slash costs and shift its London Gatwick airport operations to London Heathrow – the world’s second-busiest airport.
“Virgin Atlantic’s decision to reduce its workforce is part of a plan that will see the airline become a significantly smaller version of its pre-COVID-19 self after this pandemic,” aviation analyst Alex Macheras told Al Jazeera.
“Not only is the airline still waiting for either government or private rescue funding, it needs to preserve cash immediately if its to survive this crisis.”
Coronavirus has left many airlines’ entire fleets grounded, with lockdowns and border closures leading to a total collapse in the air travel market.
Thousands of jobs are being lost across the aviation industry, with British Airways last week announcing 12,000 potential redundancies.
“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,” Shai Weiss, CEO of Virgin Atlantic, said in a statement.
“However, to safeguard our future and emerge a sustainably profitable business, now is the time for further action to reduce our costs, preserve cash and to protect as many jobs as possible.
“I wish it was not the case, but we will have to reduce the number of people we employ. The commitment of our people throughout this crisis has been nothing but amazing, and the embodiment of true Virgin spirit.”
Virgin will also no longer use its fleet of seven four-engined Boeing 747-400s, while its four Airbus A330-200s will be retired in two years, as planned.
In its statement, the company touted the environmental benefits of switching to a 36-strong fleet comprised entirely of twin-engined planes, saying the move would reduce CO2 per revenue tonne-kilometre (RTK) emissions by an estimated 10 percent.
The company plans to keep hold of its slot portfolio at Gatwick, eyeing a possible return if and when customer demand returns, but the move away from the south London airport raises further concerns about its medium-term future.
“London Gatwick Airport now faces an added, unprecedented crisis,” Macheras told Al Jazeera. “[It is] an airport that has spent decades building and expanding its portfolios of airlines and routes in a bid to take on Heathrow.”
British Airways has also suspended operations at Gatwick and has told pilots there is no certainty over when those services might return.
Norwegian Air, which flies transatlantic routes from Gatwick, and is the airport’s third-largest carrier, is preparing to relaunch in a scaled-down version when the coronavirus crisis subsides after reaching a rescue deal with shareholders.
“A loss of two of the airport’s most important airlines would throw Gatwick back decades, and potentially wipe out the prospect of a need for a second runway,” said Macheras.
“If, however, British Airways is merely floating the idea of leaving Gatwick Airport in order to have the airport meet new demands – of lower operational costs, for example – Virgin Atlantic’s departure now strengthens BA’s negotiating position significantly.”
Gatwick’s owners said they were confident the industry would recover. “We remain very optimistic about the long-term prospects of Gatwick Airport and our resilience as a business,” the airport said in a statement.
Diana Holland, assistant general secretary of the Unite trade union, called for government support for the aviation industry.
“We have grave concerns about the impact on Gatwick airport and the local economy following this latest blow,” she said in a statement.
“The UK has world-class airline and aerospace companies – highly developed and world leading – but the sector needs support in the period of recovery from this pandemic, if it is to retain this position.”
In the middle of the 2008 global financial crisis, Branson argued against state bail-outs of private companies, saying “companies need to stand on their own two feet, and the weak ones need to go to the wall” – but Virgin Atlantic “continues to explore all available options to obtain additional external funding” said the company’s statement on Tuesday.
“Constructive discussions with several stakeholders, including [the UK] government, are ongoing, while the company continues to benefit from shareholder support.”
Unite, the British Airline Pilots Association (BALPA) and the opposition Labour party all joined calls for government support.
“The government is failing workers by not stepping in and protecting these jobs,” Labour transport spokesman Jim McMahon said.
The government says it is providing support through tax breaks, furloughing salary schemes and offering loans, and Unite said Virgin’s consultations on redundancies were premature as the firm was not using the government’s job retention programme.
Virgin Atlantic is 51 percent owned by Richard Branson’s Virgin group and 49 percent owned by US airline Delta.