Virgin Australia announces steep cuts as coronavirus hits demand

Virgin Australia has withdrawn its 2020 earnings guidance and announced steep cutbacks following a collapse in travel demand due to the spread of coronavirus. The airline said Friday it would reduce flight capacity and trim costs as it seeks relief on government charges. The company has sought to reassure investors about its financial position and said it was not in danger of breaching any debt covenants, saying it maintains the support of its largest shareholders, which include China’s HNA Group, Singapore Airlines, Virgin Group and Etihad Airways. “The group currently has a cash position in excess of $1 billion,” said Paul Scurrah, Virgin Australia CE. “We have no significant debt maturities until October 2021. I continue to get very strong board support for what we are doing.” Scurrah said the company would reduce flight capacity by 7.1% in the first half of the year, ask staff to take unpaid leave and slash marketing spending. Virgin Australia and other parts of the industry are in talks with the government about seeking relief on tens of millions of dollars of charges such as fuel excise levies, he added. Passenger numbers in the first 10 days of March fell 18%, Scurrah said. Virgin Australia’s bonds have sold off in recent weeks on concerns over the business’s financial condition.  “The coronavirus came at the worst possible time for the airline, which was already under pressure due to weak consumer sentiment, the impact of the drought and bushfires and increased leverage,” said Anthony Ip, a credit trading strategist at Citi.<br/>