Australian carrier Virgin Blue is grounding about 8% of its domestic fleet and possibly retrenching staff due to a deterioration in demand.

The carrier says in a statement to the Australian stock exchange that for the fiscal year starting 1 July it will be cutting capacity by 8% on a year-on-year basis which means up to five aircraft will be grounded and used only as operational spares.

This reduction in capacity "will impact up to 400 full-time equivalent positions at Virgin Blue" but "the company is exploring a range of initiatives to minimise headcount reduction", it says.

Initiatives being looked at include transferring staff to Virgin Blue's new long-haul carrier V Australia, getting people to work part-time and have job sharing and getting some to take leave without pay.

These steps are necessary because of the "continued forecast deterioration in domestic demand", it adds.

If Virgin Blue grounds five aircraft it will represent about 8% of its domestic fleet because, according to Flight's ACAS database, the airline has a domestic fleet of 50 Boeing 737-700/800s and 18 Embraer E-Jets.

V Australia may need more people because it recently received the first of six Boeing 777-300ERs it has on order and is due to launch operations on 27 February with a Sydney-Los Angeles service.

Virgin Blue's latest cutbacks come after it announced last July that it had reached an agreement with Embraer to delay the delivery of five regional jets that were to have been delivered in 2009.

The carrier also said that in late 2008 it would ground two 737s.

It is unclear if Virgin Blue may seek to also delay the delivery of 737s in light of the fact it is working to cut rather than increase capacity.

Virgin Blue's spokeswoman was not immediately available for comment.

The ACAS database says Virgin Blue has six E-Jets and 19 737s on order.

Source: Air Transport Intelligence news