Virgin Atlantic is under heavy losses due to rising fuel costs and increased competition, reports The Sunday Times.
Sir Richard Branson's Virgin Atlantic has incurred some heavy losses and fears of job cuts and pay hike freezes are making the rounds. An internal memo sent by Craig Kreeger, Virgin Atlantic's new chief executive, and reviewed by The Sunday Times, warned the airline's financial performances are not up to par and the company was likely to incur a loss up to $201 million approximately.
Kreeger's concern for the airline's future led him to order an immediate halt on all payroll increases across the business and start a "broad-based cost-cutting plan," said the memo. He also said the "2012-13 financial year airline performance will be a significant loss" and due to the losses the airlines incurred in the last two years, it would not be possible to make any new investments. Virgin Atlantic was under a loss of nearly $120 million last year.
Kreeger also warned about the possible decisions that will be made to drive towards profitability.
"One of those decisions is to recognize and communicate the reality that we cannot afford any pay increases this year. It is not ideal that this is the first big decision I have to take," he said in the memo.
He has planned approximately a $135 million improvement plan by increasing long-haul revenues by nearly $75 million and an additional $60 million by cutting costs. He said that the $135 million improvement is "significant but not enough to get us back to profitability."
The memo further said that the company will take additional steps in an effort to gain profitability by introducing fuel efficient aircrafts and increase business by initiating new domestic flights.
"These improvements will result in considerable financial savings," it said. "The airline has also made the decision to suspend salary increases for this financial year."
