Virgin Blue has revealed it is on track to make a loss of between $30 and $80 million for the current financial year, with the airline blaming a challenging second half due to rising global fuel prices and natural disasters.
Virgin Blue says record fuel prices will add an extra $50 million to the airline’s fuel costs for the second half of FY11, it expects the devastating Queensland floods and Cyclone Yasi to have a projected combined impact of approximately $50 million, while February’s Christchurch earthquake is set to have cost $15 million.
To help deal with the expected losses, Virgin Blue says it has “initiated an action plan which identifies cost savings and revenue initiatives, including fuel surcharges and capacity reductions”. However, the company warns this will “only partially offset the impact of these events on FY11 profit”. As a result, full year profit before tax (excluding hedging ineffectiveness) is now estimated to be between $30 and $80 million, assuming no further substantial increase in the cost of fuel or “material deterioration” in the trading environment.
“We have witnessed an unprecedented number of significant events in an extraordinarily short period of time, including natural disasters and a sharp spike in fuel prices. These events have severely impacted consumer confidence, resulting in a slower than usual recovery in tourism,” Virgin Blue Group of Airlines CEO and managing director, John Borghetti, said.
“These market conditions have further validated our Game Change Strategy which will see us less dependent on the leisure sector and reduce the volatility in our business. We are more confident than ever that our strategy is the right one.”
For the first half of the financial year, Virgin Blue had posted a net profit after tax of $24 million.