The new chief executive of Virgin Atlantic, a UK-based air carrier, has imposed an immediate pay freeze at the company in reaction to the expectation of large annual losses, according to a report in the Sunday Times.
An internal memo that has been seen by the newspaper shows that recently appointed executive, Craig Kreeger, has reacted swiftly to the airline’s expected record annual losses of £135 million. With reference to Virgin Atlantic’s financial performance, the memo reportedly said that it is ‘well behind where we anticipated.’ The predicted loss will follow a deficit of £80.2 million that the company reported last year.
The airline employs 9,000 staff that will be subject to the freeze, and while no job losses have yet been announced, the option is unlikely to be discounted as the company endeavours to balance its books.
Virgin Atlantic has apparently confirmed the detail of Kreeger’s memo, which talks of a cost-cutting plan in addition to the pay freeze. The company has already implemented plans to save £40 million and take an extra £50 million in long-haul revenues, but Kreeger has decided that these actions alone are unlikely to turn its finances around.
‘The 2012-13 financial airline performance will be a significant loss. Two years of significant cash losses have depleted our resources and decreased our ability to invest,’ Kreeger said, and expanding on his pronouncement that the company would have to make ‘some tough calls,’ he added, ‘One of those decisions is to recognise 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.’
Virgin is introducing more fuel-efficient aircraft, introducing a new UK domestic airline, Little Red, and has formed a partnership with US-based Delta Airlines to help it compete with the BritishAirways/American Airlines alliance on transatlantic routes.