Financial News

Virgin Atlantic, the UK long-haul airline controlled by Sir Richard Branson, is cutting capacity by seven per cent in the coming winter season and is planning to axe around 600 jobs or close to eight per cent of the workforce.

Steve Ridgway, chief executive, said, "the outlook for the industry is as bleak as ever and all airlines are having to shrink their businesses. The fittest will survive and be in a stronger position when the economy grows."

He said the group would seek to minimise the number of compulsory redundancies.

The latest contraction in the operations follows the elimination of another 600 jobs announced last February together with a pay freeze from last March. In total Virgin Atlantic, which is 49 per cent owned by Singapore Airlines (C6L.SI - news) , has announced plans to reduce its previous workforce of 8,400 by more than 14 per cent.

The airline said it was planning to suspend its daily London Heathrow/Chicago service in the coming five-month winter season from the end of October and would reduce its twice daily Heathrow/Hong Kong service to a single daily flight.

There would be additional frequency reductions on some other routes throughout the winter period.

In the face of falling demand for travel the group is taking a variety of measures to cut costs including reducing capacity, freezing pay, offering unpaid leave and cutting jobs.

In May, Singapore Airlines said Virgin Atlantic had barely broken even in the 12 months to the end of March and was heavily lossmaking in the final quarter of that period.

The UK carrier has previously indicated its financial performance was expected to deteriorate significantly in the current financial year to the end of February 2010.

Balpa, the pilots union, said on Thursday, the announcement that up to 600 jobs were threatened with redundancy was "extremely worrying."

Jim McAuslan, Balpa general secretary, said the union would "pressure-test" claims that the cuts were necessary and would seek to save "each and every job."

Only two weeks ago Virgin Atlantic announced it was acquiring 10 A330-300 widebody jets, worth $2.1bn at list prices before discounts, for delivery in 2011 and 2012. The new jets would support the expansion of capacity on existing routes and the opening of some new destinations, it said.

Mr McAuslan said Balpa was prepared to "share the pain to preserve jobs in the downturn" as long as the pilots could "later share the gain when things turn for the better."

British Airways (LSE: BAY.L - news) pilots are balloting on a package of pay cuts and productivity improvements tied to a long term share incentive scheme, as BA also seeks to cut costs and staunch mounting losses. Balpa claims the package could save BA £26m a year from October.