News
Virgin Australia first-half profit down 70%
February 10th 2017
Australia’s second largest airline, Virgin Australia, has released its second quarter results. Read More » The full-service carrier posted a 78.5% net profit decline to A$13.1 million (US$10 million) for the quarter through to December 31 as weak market conditions and sluggish domestic demand hit revenues.
The John Borghetti-led carrier said the statutory result reflected the impact of restructuring costs from its ongoing ‘Better Business Program’ launched last year, although Virgin did not specify the charges.
The Brisbane-headquartered airline’s underlying profit before tax, considered the most reliable financial health indicator, dropped 37% to A$45.9 million.
For the first six months combined, Virgin’s after-tax performance slipped 70% to A$20.7 million.
“Subdued industry trading conditions in the domestic market continued to adversely impact revenue during the second quarter,” Virgin said in a statement, adding the Virgin Group, including Tigerair Australia, would “continue to actively manage capacity in response to subdued trading conditions.”
On a brighter note, Virgin Australia achieved an A$936.3 million reduction in net debt and lifted its cash balance to A$1.6 billion, the highest ever reported for the group.
The group’s fully-owned low-cost carrier (LCC), Tigerair Australia, performed better than its parent. The budget carrier continued posting double-digit growth during the second quarter, with domestic and international ASKs growing 24.7% year-on-year.
Nevertheless, Tigerair Australia is looking at stiff headwinds ahead after Indonesian aviation authorities last week revoked the carrier’s permits to operate flights to Bali due to what they said was a breach of its charter permit.
Tigerair CEO, Rob Sharp, said the LCC had been informed it required an “alternative regulatory solution” that left it with no other option but to withdraw.
“We have been advised by Indonesian authorities that in order to continue operating our flights to Bali, we would have to transfer to a new operating model [AOC] that would take at least six months to implement and would compromise our ability to offer low-cost airfares to Australians,” Sharp said in a statement.
“Providing a reliable, low-cost service is critical for Tigerair Australia and our customers, and therefore our only option is to withdraw from flying to Bali altogether.”
Flights from Melbourne, Adelaide and Perth to Bali were the only international flights offered by Tigerair Australia. The LCC adopted the routes from parent Virgin Australia last year as part of the ‘Business Better’ consolidation.
Tigerair now flies 14 A320s and four B737-800s as it shifts from an all-Airbus to an all-Boeing operator. The LCC is expected to redeploy its excess Bali capacity domestically, resulting in a further yield decline in the fiercely-competitive domestic market.
