Virgin Blue Response to Record Fuel Costs13/06/2008
Virgin Blue today announced capacity reductions and a $50 million package of cost savings as part of the company's response to continuing record fuel prices. The initiatives are the first outcomes of an ongoing review monitoring global jet fuel prices which now equate for 35% of the company's cost base.
Board and management reaffirmed their commitment to the airline's New World Carrier strategy as the right strategy in a period which will see a dramatic shakeout in the global aviation industry along with shifts in business and consumer sentiment.
"It's not a case of planning interim measures to offset a spike in the cost of fuel, all airlines must come to terms with a new reality in our industry,” said Brett Godfrey, Virgin Blue Chief Executive.
Whilst continuing development of product initiatives under its New World Carrier strategy Virgin Blue will move immediately to implement a number of measures, including the following :-
A programme of $50 million of identified savings in the 2008-09 financial year via a cost reduction initiative.
Effective immediately a market by market fares review raising ticket prices by an average of
$5 across approximately 55% of Australian domestic routes.
A 6% reduction in planned 2008/9 capacity growth within the September quarter via removal of four aircraft from the Australian domestic market.
A further 2% of domestic capacity will be redeployed from loss-making services into identified better performing, new or uncontested markets.
Virgin Blue will cease its once weekly Sydney - Proserpine service effective July 2008, however daily connecting services through Brisbane will remain.
Virgin Blue will cease flying it’s three times weekly Darwin - Melbourne direct service effective August 2008. This route will be now be serviced via a daily service through Brisbane.
Immediate salary freeze for all management positions for the ensuing fiscal year.
The company has determined it will not exit nor reduce service frequency on Trans-Tasman, Pacific Islands and domestic New Zealand routes operated by its Pacific Blue subsidiary.
Boeing 737 services operated by Polynesian Blue, Virgin Blue’s joint venture airline with the Government
of Samoa will not be affected.
No staff redundancies are necessary as a result of these initiatives.
Further proposals are under active consideration by the airline in its on-going review to effectively deal with persistent and record energy prices.
Virgin Blue currently has 53% of it fuel bill next year hedged at $108 WTI. The airline's fuel bill in the current financial year will be over $500 million, an increase of 21% on the prior year.
About Virgin Blue Group
Multi award winning airline Virgin Blue and international carriers Pacific Blue and Polynesian Blue currently operate a fleet of 63 modern Boeing 737 and Embraer E-Jet aircraft flying to 24 Australian and eight international destinations including New Zealand, Fiji, Samoa, Tonga, Vanuatu and the Cook Islands. Virgin Blue was the first airline in the world to launch a Government-certified carbon offset program, where Guests can offset the carbon emissions from their flights. Virgin Blue Group has also announced plans to launch Australia's newest international airline, V Australia (www.vaustralia.com), with flights between Sydney and Los Angeles set to launch on 15 December 2008, subject to regulatory approvals.