Virgin Blue to reduce capacity in New Year

Australia’s Virgin Blue has announced that it will be cutting routes in the New Year and instituting other major cost-saving measures to cope with worsening financial conditions, according to a Herald Sun report.

The country’s second-largest carrier is expecting to break even for the current financial year, but will have to absorb losses incurred during the start-up of V Australia, its trans-Pacific subsidiary set to launch service in late February 2009.

Growth in capacity that had been budgeted at 20 per cent will drop to eight per cent, the airline’s chief executive, Brett Godfrey, reported at the annual shareholder meeting last week.

A review will be completed in the coming weeks to determine where the new cuts will occur, as the airline focuses more heavily on boosting cash reserves.

In June, Virgin Blue instituted a $50 million cost-savings initiative, and at this point has deferred the delivery of aircraft, redeployed planes and frozen the salaries of executives.

The cost of fuel has more than doubled, from 15 to 32 per cent of the airline’s operating costs, but now that the price of oil has dropped significantly the major issues facing the carrier are the global economic downturn and the fall in the value of the Australian dollar.

Virgin Blue’s chairman, Neil Chatfield, commented that the current financial year will be the carrier’s most difficult since beginning operations in 2000.

www.virginblue.com.au