Virgin Atlantic is freezing salary increases in a bid to cut huge annual losses.
Losses of £135 million are reported by the Sunday Times, raising fears of job cuts at the airline founded by Sir Richard Branson.
Fuel costs and increased competition on transatlantic routes are blamed for the deficit.
And new chief executive Craig Kreeger said it was ‘well behind where we anticipated’ in a leaked internal memo.
He has set up a pay freeze across the company and introduced a cost-cutting plan.
In the memo, Kreeger said: "We cannot afford any pay increases this year. It is not ideal that this is the first big decision I have to take."
Kreeger has told staff he wants to increase long-haul revenues by £50 million and also cut costs by £40 million.
He added: "It results in about £90 million improvement – significant but not enough to get us back to profitability," he said.
Virgin confirmed it is introducing newer, more fuel efficient planes and that it aims to increase revenues through its new domestic service – the Little Red – flying from Heathrow to Edinburgh, Aberdeen and Manchester.
It also hopes to benefit from its tie up with Delta Air lines which bought a 49% stake in Virgin from Singapore Airlines last year, leaving the Virgin Group with a controlling 51% stake.
It added: "The airline has also made the decision to suspend salary increases for this financial year."
