Airline News
Virgin Australia narrows losses and tweaks network
August 17th 2015
Virgin Australia Group kicked off the reporting season in the Pacific with a full-year net loss of A$94 million ($72 million), narrowed from an A$354 million loss in the previous financial year. Read More »
Virgin Australia Group chief executive, John Borghetti, said the results were encouraging and added the group was “on track to return to profitability and report a Return on Invested Capital in line with its cost of capital for the 2016 financial year”.
Domestic operations jumped back into the black, with an A$111 million profit, which reversed a A$210 million loss in the previous financial year when Virgin and Qantas Airways were fighting a bitter price war. Virgin's international division continued to weigh on the group with a A$68.9 million loss, a deterioration of A$2.8 million, as increased competition in the region and on long haul markets hammered yields. Virgin’s Tigerair Australia trimmed its losses to A$8.6 million, a A$42 million improvement on last year. The low-cost subsidiary will take over three Virgin Australia-Denpasar routes from March, although the group will maintain its mainline brand on flights from Brisbane and Sydney to Bali. New competition in the Denpasar market is on the horizon, with Indonesia AirAsia X last week announcing a new five-weekly Bali-Sydney A330 service from October.
Borghetti expressed confidence that Virgin’s international business would be profitable by the end of fiscal year 2017. He said the unit was restructuring its operations. It had introduced business class on its trans-Tasman and Pacific Islands routes that had shown positive results. “The Group’s unit revenue gains combined with our continued leadership on cost will drive earnings growth. We now have a strong balance sheet from which to execute our strategy and a powerful portfolio of growth businesses,” Borghetti said. “As a result of the progress on our strategy to date, we are on a positive trajectory to significantly improve financial performance for the 2016 financial year.”
Rival Qantas is forecast to report a $960 million underlying pre-tax profit for FY15, thanks largely to a successful cost-cutting program, a lower fuel price and higher fares due to less domestic and international competition. The Qantas results will be announced on August 20.
In other news, China Eastern Airlines said its board had approved a proposal to end the establishment of low-cost carrier, Jetstar Hong Kong, which was planned to be city’s fifth airline. The Shanghai carrier plans to hold discussions with partners, Qantas and Hong Kong’s shun Tak Holdings, on settlement matters related to the three year old venture.
Virgin Australia and Delta Air Lines last Friday gained final regulatory clearance from the Australian Competition and Consumer Commission to continue their trans-Pacific alliance for another five years, just months before competition between Australia and the U.S. will intensify as Qantas and American Airlines begin new flights.
