Virgin Australia posts $84m loss despite rising revenue

Virgin Australia has posted a $83.7 million loss. (Rob Finlayson)
Virgin Australia has posted a $83.7 million loss. (Rob Finlayson)

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.

 

Comments

  1. Glen CBR says

    What? No talk of job cuts, route cancellations, aircraft deferrals? That’s not how you run an Australian airline! Virgin’s strategy of starting with nothing and building it up is all wrong. Ask AJ: you start with a big airline, whinge about everything possible – but mainly the people who work for it (also, the carbon tax [to which ALL Australian operators are subject ]); those naughty people who dare to compete; foreign airlines; foreign governments; the GFC; the Qantas Sale Act (that new thing that happened in 1995 that Mr Joyce was unaware of when he took the job); having to actually maintain aircraft; the dog who ate his homework in 1983; that unforeseen grounding from 2011; on and on and on… make every excuse under the sun (except “I’m sorry it was MY fault”) – and then shrink it to obscurity and send it broke.
    I hope his job is still waiting for him back at Ansett – Good luck Qantas! Good luck Qantas staff. All the very best of luck to John Borghetti and the people at Virgin who are just ‘getting on with it’ and succeeding (also winning the PR war and customer loyalty (Staff loyalty too it would seem)) over Qantas on a daily basis.