Dozens of Hong Kong-based cabin crew could lose their jobs after Virgin Atlantic announced it would suspend its daily service between Hong Kong and Sydney from May 5 as part of a cost-cutting plan after losses of £173 million (HK$2.19 billion) in the past two years.
The airline employs 158 Hong Kong-based cabin crew for its Hong Kong to Sydney and Hong Kong to London routes.
"Unfortunately, our intention to stop operating this route will directly impact some of our staff and their roles in Sydney and Hong Kong," a Virgin Atlantic spokeswoman in Hong Kong said yesterday. She said the number of redundancies could not be confirmed for a few weeks, until a consultation period was over.
A source who attended a staff briefing yesterday said about half of the cabin crew based in Hong Kong would be laid off.
Virgin, controlled by British businessman Richard Branson, said rising costs and a challenging economic environment meant the Sydney route was no longer profitable, but it would still fly the Hong Kong-London route. "These are still difficult times for the airline industry and as part of our strategy to operate more efficiently, we need to deploy our aircraft to routes with the right level of demand to be financially viable," chief executive Craig Kreeger said.
Virgin's abandonment of the Hong Kong to Sydney route leaves Cathay Pacific Airways as the only carrier operating the "kangaroo route" from Sydney to London via Hong Kong.
Analysts said Virgin's move followed strong growth in passenger traffic between Europe and Australia for Middle Eastern airlines Etihad and Emirates at a time when other airlines were forming strategic alliances on routes to Australia, such as the co-operation between Cathay Pacific and British Airways.
"The strong are getting stronger and Virgin lacks scale," said Will Horton, senior analyst at Capa, a Sydney-based aviation consultant. "Virgin itself is changing and the cancellation of Sydney is part of it."
Branson sold a 49 per cent stake in Virgin to Delta Air Lines in December 2012, in a move to help the loss-making airline to stay afloat.
An industry veteran said the airline needed to be more pragmatic, as its new shareholder was more cost conscious.
"The move by Virgin Atlantic is like what Qantas did a while ago, cutting out Hong Kong as the transit point of the kangaroo route," Kelvin Lau, transport analyst for Daiwa Capital Markets, said.