(Bloomberg) -- Virgin Atlantic Airways Ltd. plans to eliminate 3,150 jobs, or about a third of the workforce, and shutter its London Gatwick hub to ride out the coronavirus crisis after struggling to secure a U.K. government bailout.
The carrier founded by billionaire Richard Branson said Tuesday it will focus on operating from its main London Heathrow base and Manchester. Routes from Gatwick, serving leisure markets including Orlando, Florida, and Barbados in the Caribbean, will now move to Heathrow.
“This is a devastating day for us,” Chief Executive Officer Shai Weiss said in an interview. “But we must be sustainably profitable to repay the financing we need, which means resizing and reshaping the business.”
As the global travel industry grinds to a halt because of the Covid-19 pandemic, carriers around the world are hacking back at staff levels, with some seeking multi-billion euro state bailouts. Virgin's arch rival British Airways is preparing to cut as many as 12,000 positions and is also looking at exiting Gatwick, which attracts less business traffic than Heathrow.
The swathe of job cuts in U.K. aviation, including a possible 8,000 posts at engine maker Rolls-Royce Holdings Plc, is set to take a toll on an economy that's forecast by Bloomberg Economics to contract by 7.6% this year.
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Prime Minister Boris Johnson's government has tried to stem the damage of widespread layoffs by paying part of the wages of more than 4 million workers furloughed while the country remains in lockdown. It has so far ruled out a broad bailout of the aviation industry, asking companies to first tap all commercial avenues to raise funds to protect taxpayer interests.
The Balpa pilot union said the job losses represent a “terrible blow” for the industry and called on the government to stop “prevaricating” over support for Virgin Atlantic. The opposition Labour Party said it's time to give U.K. aviation a sector-specific deal to protect workers.
The measures announced Tuesday, which also include slimming the Virgin Atlantic fleet to from 45 planes to 36, are necessary given what may be a three-year slump in demand, CEO Weiss said. Discussions on potential funding with various parties, including Johnson's government, are ongoing and have been constructive, according to the carrier.
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Balpa said in an email that without immediate government intervention Britain's once world-leading aviation industry will be “decimated,” sending shock waves through the wider economy.
Discussions with potential private investors are underway with the help of Houlihan Lokey and the carrier continues to seek about 500 million pounds in support from the U.K., according to a person with knowledge of the matter, who asked not to identified as talks are private.
Virgin Atlantic plans to lease out its Gatwick takeoff and landing positions in the short term, and could initially bring back flights on a summer-only basis should demand permit. Frequencies will be reduced to some destinations but there are no plans to remove any from the network.
The carrier will also permanently ground its seven Boeing Co. 747 jumbo jets as of now, with four Airbus SE A330s also exiting in 2022, by which time the fleet will have been pared to 36 newer twin-engine planes. Delivery schedules for eight A350 orders and 16 A330s will be spaced out, though only two or three planes are due next year.
The Virgin Holidays division will also close 15% of its retail outlets and be rebranded as part of the airline. Weiss said the measures are necessary to deliver a return to profitability in 2021.
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