CANBERRA: Virgin Australia has expected $10.2 million pre-tax profit over the first six months of the 2015 financial year, but reported an overall statutory loss after tax of $47.8 million from July to December 2014, a period when air travel is typically at its strongest.
That number is still well down on earlier analyst expectations of a $100+ million deficit, with falling fuel prices helping push back the tide of red ink.The overall trend is positive, with Virgin climbing from a $45 million pre-tax loss in the same period last year.
The airline says it received a $3 million benefit from lower fuel prices in the second half of the year, some of which was passed on to travellers in the form of lower airfares and the fuel surcharge being rolled back into base fares. “We should see a benefit in the second half [of the 2015 financial year] of around $50 million if oil prices remain at the current level” Borghetti allowed, although he said “the key driver in this improvement has been executing the Virgin Vision strategy [which is] all about driving cost reduction and growing yield. This centred on “the disciplined execution of our five-year $1 billion cost reduction program” which Borghetti described as being about finding efficiencies “right across the board.”
Also contributing to the better-looking balance sheet was higher revenue from corporate and government markets, which Borghetti has chased and courted as part of the airline’s transformation from the low-cost Virgin Blue to a full-service Qantas challenger. “The Group remains on track to reach its target of 30% of Virgin Australia domestic revenue from the corporate and government segment by 30 June 2017” Borghetti predicted.
Tigerair Australia remains a significant drag on Virgin, although the low-cost airline is expected to break even by mid-2016 after sniffing out a $500,000 profit in the last three months of 2014 compared to the $15.5 million sinkhole in the previous quarter. This was noticeably the first time the budget airline has posted a quarterly profit since 2010. Markers on Virgin’s roadmap for the year ahead include the opening of lounges at Alice Springs and Darwin in March, along with a substantial extension to its Brisbane lounge; a new Premium Entry for Brisbane lounge lizards in August; and the airline’s new Perth terminal and lounge in the second half of 2015. Virgin Australia’s new lounges coming in 2015. Closer to hand, Virgin will launch business class on its trans-Tasman routes at the end of February, beginning with Sydney-Auckland flights and then expanding to other ‘pointy end across the pond’ routes until all ten of its trans-Tasman jets are upgraded by April 2015.
