Virgin Australia is slashing its Tigerair fleet and cutting back on flights to rein in costs as the coronavirus cruels demand for leisure destinations and its budget airline's routes.
The airline says cancellations and dwindling demand in the short term due to the coronavirus outbreak will hit earnings by $50 million to $75 million in the second half.
Virgin Australia made a net loss of $88.6 million for the six months to December 31 compared to a $73.8 million profit a year ago.
The net loss attributable to owners was $97.3 million compared to a profit of $54.8 million.
The weaker result also reflected the cost of buying all of its profitable Velocity Frequent Flyer program, writing off assets, paying more for fuel and labour, and after workforce reductions.
Group chief executive Paul Scurrah said revenue and passenger numbers grew in the half year but the group is still in the early stages of transitioning the business to a lower cost base.
"There's further work to do on costs and we will continue to review the network and our capacity in line with demand," Mr Scurrah said.
Virgin Australia will reduce capacity across the group in the second half of FY20 by three per cent as cancellations rise and forward bookings drop, largely for leisure destinations and Tigerair routes.
"The coronavirus outbreak is having a significant effect on the travel industry and we are also seeing weaker domestic and international demand," Mr Scurrah said.
"Today we announced a number of capacity changes that address markets most affected, particularly Tigerair."
Seven Tigerair A32O aircraft will cease flying by October 2020, in addition to the previously flagged exit of five planes - two A32Os and three Fokker 100s.
Tigerair will stop flying five routes - the Sydney to Adelaide, Cairns and Coffs Harbour routes; its Melbourne to Coffs Harbour flights, and its Hobart to the Gold Coast route.
Virgin had already flagged a withdrawal from the Sydney-Hong Kong route from March after the tricky market was worsened by prolonged civil unrest and the coronavirus outbreak.
It will launch a Brisbane to Tokyo flight in March.
There will be no new planes until July 2021 due to the deferral of the Boeing 737 MAX.
Virgin Australia posted a first half revenue of $3.118 billion for its first half compared to $3.07 billion in the prior corresponding period.
Virgin Australia is on track to have 400 jobs gone by the end of March, and 750 by the end of the year.
The staff reductions are expected to save it $75 million a year and the company is reviewing suppliers and contracts to save $50 million a year.
The company's shares were flat at 12 cents at 1307 AEDT.
VIRGIN POSTS HALF YEAR LOSS
* Half-year net loss of $88.6m from $73.8m profit
* Revenue 3.12b vs $3.07b
* No dividend declared.
