Virgin Australia has posted a $83.7 million after tax loss for the first half of the 2014 financial year, despite a near six per cent increase in revenue to $2.22 billion.
But despite the loss, and despite all the talk of capacity wars, the airline’s domestic operations, like Qantas’s and Jetstar’s domestic operations, are profitable, generating EBIT (earnings before interest and tax) of $25.7 million, albeit down 55 per cent on the same half of the 2013 financial year.
Instead Virgin’s losses were generated in its international business – an EBIT loss of $29.5 million – and its 60 per cent share of Tigerair, which contributed a loss of $18.4 million. The airline also booked losses of $49.9 million attributed to “business transformation and other” expenses, including costs from the restructuring of Skywest (now Virgin Australia Regional Airlines). Excluding the Tigerair and “transformation” losses, Virgin says it recorded a pre-tax loss of $49.7 million.
“The result reflects the tough trading conditions across the entire industry for the first half of financial year 2014,” said CEO John Borghetti. “The Australian aviation market continues to be impacted by the significant capacity growth which occurred during the 2013 financial year, compounded by weak economic conditions and the inability to recover the cost of the carbon tax. Consequently, the Australian domestic aviation industry has made a first half loss for the first time in 20 years.”
Some highlights of the results announcement include:
– Positive cash flow of $47.6 million.
– ‘Normalised’ domestic capacity growth of 1.4 per cent, excluding Tigerair
– A 4.5 per cent increase in unit cost (including fuel and foreign exchange costs)
– A 45 per cent increase in Skywest’s charter revenue
– A $27 million impact from the carbon tax, which the airline said “could not be recovered due to strong competition in the market”.
Virgin says it won’t provide any outlook on the rest of the financial, nor any details of its fleet and capacity terms. Nor has the airline flagged any significant changes to its strategy as it seeks to return to profitability.