Virgin Blue announced last Friday, in response to continuing record fuel prices that it would be reducing capacity and cutting A$50 million from its costs.
The initiatives are the first in DJ from a wide-ranging review of how to handle fuel prices that now account for 35% of its cost base.
CEO Brett Godfrey said that high fuel prices are here to stay, adding, “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,”.
The airline will continue implementing its New World Carrier strategy, which has delivered solid profit gains over the past 18 months increasing fares by an average A$5 on around 55% of domestic routes and removing four aircraft from domestic service during the September quarter, a 6% reduction in planned capacity growth.
An additional 2% of domestic capacity will be redeployed onto more profitable routes.
Virgin Blue management also face a salary freeze, with Stefan Pichler, Virgin Blue COO saying today to The Mole at ATE 2008 that there would be no layoffs as the Virgin Blue team is the airline’s most important asset.
Virgin Blue has 53% of its fiscal 2008-09 needs hedged at A$108 West Texas Intermediate, with the fuel bill in the current fiscal year ending June 30 will rising 21% year-over-year.
by The Mole
