Virgin Australia cuts domestic capacity by 90 per cent, suspends all Tigerair services

Airline Virgin Australia Group (ASX: VAH) will extend its domestic capacity reductions from 50 per cent to 90 per cent and suspend all Tigerair Australia domestic services effective immediately.

The measures come as many Australian states and territories make the decision to close borders, forcing around 125 Virgin aircraft to be temporarily grounded.

Because of the cuts, approximately 80 per cent of VAH's workforce - or 8,000 out of a total 10,000 staff - will be temporarily stood down.

The remaining 10 per cent domestic capacity will be retained for transportation of essential services, critical freight and logistics.

The cuts follow Virgin's decision to suspend all international flying from 30 March to 14 June 2020, and close all Virgin Australia operated lounges across the network.

"There has never been a travel environment in Australia as restricted as the one we see today and the extraordinary steps we've taken have been in response to the federal and state government's latest travel advice," says Virgin Australia CEO and managing director Paul Scurrah.

"We are now facing the biggest grounding of aircraft in this country's history. From the end of this week we will be repositioning and grounding more than 125 aircraft in our fleet, suspending almost all our domestic and international flying until at least the middle of June."

"I am only too aware of how much our people are hurting at the moment and these very tough decisions have weighed heavily on me and my leadership team. We are talking to our teams and we are working hard to do what we can to protect jobs and extend payments for as long as possible."

The 90 per cent reduction to the group's flight network means it will suspend services to 19 Australian destinations currently operated by the airline.

VAH team members that have been stood down have been asked to access accrued leave entitlements or take leave without pay.

Virgin Australia guests who are booked to travel between now and June 30 are encouraged to visit the Virgin Australia customer care hub at virginaustralia.com to request a travel credit or obtain more information about their options.

Elsewhere in the aviation industry, Qantas (ASX: QAN) has today announced a new round of debt funding, securing $1.05 billion in additional liquidity to strengthen its position to weather the coronavirus storm.

This debt has been secured against part of the Group's fleet of unencumbered aircraft, which were bought with cash in recent years. The loan has a tenure of up to 10 years at an interest rate of 2.75 per cent.

This funding increases the Group's available cash balance to $2.95 billion with an additional $1 billion undrawn facility remaining available.

"Over the past few years we've significantly strengthened our balance sheet and we're now able to draw on that strength under what are exceptional circumstances," says Qantas CEO Alan Joyce.

"Everything we're doing at the moment is focused on guaranteeing the long term future of the national carrier, including making sure our people have jobs to return to when we have work for them again."

Updated at 9:22am AEDT on 25 March 2020.