Business Round-Up
Virgin Australia announces loss - and delivers a dig at Qantas
March 1st 2014
A day after Qantas’ dramatic announcement of its survival strategy, rival Virgin Australia confirmed it had recorded a first half loss of US$75.3 million after achieving a $20.6 million profit in the previous six months. Read More » Battered by the battle with Qantas and the group’s budget carrier, Jetstar in the domestic market, chief executive John Borghetti (pictured) attributed the loss to capacity growth, weakening economic conditions and the Australian government’s carbon tax.
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At the results announcement, Borghetti took the opportunity to strike back at claims by Qantas chief executive, Alan Joyce, that Virgin was flooding the market with seats. He cited figures that showed Qantas had increased seats in the domestic market by 7.1 million in the last three years compared with Virgin’s 2.8 million seat expansion. But the Virgin Australia boss shied away from giving guidance about the amount of capacity it intends to pump into the market in 2014. “When you have a competitor who clearly states he is going to put at least two airplanes in service for every one you are going to operate, why would I tell my competitor how many planes I’m going to put on?” he said.
Borghetti warned the Australian national government that giving financial aid to Qantas would harm the aviation industry. “It is not our place to tell the government what to do, but any government or opposition party should think very carefully before it decides to pick winners in an industry. We have earned our right to exist. That is what free enterprise and the free market is all about. If Australia is to prosper in the age of globalization, then the ‘age of entitlement’ to be dominant needs to go,” Borghetti said.
He said Australia’s aviation industry had made a first-half loss for the first time in two decades. Australian airlines make the bulk of their revenue in the first half of the fiscal year, which runs from July 1 to December 31. The poor returns for both major carriers paint a gloomy picture for the final six months of the year. “However, Virgin Australia continued to increase its proportion of domestic revenue from the corporate and government market segment. We remain on track with our consistent strategy,” said Borghetti.
The airline reported a pre-tax loss of $44.8 million, which excludes $16.1 million in losses from its majority held Tigerair Australia, and $44.8 million in other expenses. The Brisbane headquartered carrier had almost $806 million in cash, up from $519.7 million at the end of June. It declined to give earnings guidance for the current financial year because of the “uncertain economic environment”.
