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Virgin Australia posts $355 million loss in 2013/14, sells partial stake in frequent flyer program

written by australianaviation.com.au | August 29, 2014
Virgin Australia is reviewing some of its New Zealand-based management positions. (Rob Finlayson)
Virgin Australia has suffered from excess domestic capacity. (Rob Finlayson)

Virgin Australia has posted a full year net loss of $355.6 million and says conditions remain challenging in the current year.

The result was below market consensus of a $214 million loss for the 12 months to June 30 2014, according to a median of five analyst estimates gathered by Australian Aviation, and represented a deterioration from the $98 million loss in 2012/13.

Virgin said underlying profit before tax, which the airline regards as the best indication of its financial performance, came in a $211.7 million, broadly in line with market estimates of a $210 million loss.

Australia’s second largest airline group posted an underlying loss before tax of $35 million in the prior corresponding period.

Revenue rose 7.1 per cent to $4.31 billion, Virgin Australia said in a regulatory filing to the Australian Securities Exchange on Friday.

Virgin Australia chief executive John Borghetti said it was a brutal 12 months.

“The 2014 financial year has seen one of the most difficult operating environments in the history of Australian aviation,” Borghetti said in a statement.

“While the Virgin Australia group performed well in attracting high yielding passengers and containing cost growth over the full year, underlying revenue performance was impacted by the challenging operating conditions.”

Virgin did not offer profit guidance for the current financial year, citing the uncertain economic environment.

“While the current environment remains challenging, the Virgin Australia group has significantly enhanced its strategic position over the last four years and is well placed to capitalise on market recovery,” Borghetti says.

Meanwhile, Virgin said it would sell 35 per cent of its frequent flyer program Velocity to fund manager Affinity Equity Partners, subject to certain conditions including Foreign Investment Review Board approval.

The transaction gave Velocity an enterprise value of $960 million, Virgin said, and was expected to increase the company’s cash balance by $336 million.

“This transaction will allow us to accelerate the program’s strategy and realise its full potential as a world class loyalty business,” Borghetti said.

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Comments (5)

  • Glen Towler


    It looks to me that both Qantas and Virgin Aus are paying the price for lack of investment and a over supply of seats on the Aus market .Looks to me as they really do need new fuel efficent aircraft if revenues are up but profits are down then fuel costs must be a factor.

  • Nikee


    Glen Towler,

    Virgin have a fuel efficient fleet. They operate 777-300ERs, A330s, 737-800 (737-MAXs are on order), E190s and ATR-72s.

    Qantas has thirsty aircraft: 747-800s and 767-300s. In addition to this their A380s are probably not right for them, the 777-300ER might have been a better aircraft.

  • Mal


    Not so sure the fuel thing is correct. The real issue is over supply in seats. Basic supply and demand suggests that this will result in lower prices. And it has. The data shows that to be the case too. With reduced capacity the average price will rise and therefore the profitability will increase in parallel. This is occurring already in terms of capacity.

    VA has aircraft as fuel efficient as most leading airlines (737-800’s, 777-300ER and A330’s), so that’s not the issue for them. They also have orders for the 737-MAX’s so they are well positioned regarding the right aircraft. In terms of the major cost inputs, the ones that are causing grief are over capacity, which impacts pricing (assumes that the economy remaining stable) and fuel hedging (which they may have right). VA seem to have lots of the elements right – sort the capacity issue and they should be in better shape. I think the basic strategy is correct.

  • Shane


    Good to see John Borghetti hasn’t blamed the loss on the price of fuel. AJ has been doing it for years now. It’s getting tired.

  • Adrian


    Interesting that only fifty million of the loss was due to the carbon tax and as a proportion of revenue it is miniscule. Having exaggerated the impact of the carbon tax, it is going to be an interesting public relations exercise to explain the rise in fares after the scrapping of the carbon tax.

    Also will airlines like REX have a case for unfair competition against QANTAS and Virgin for operating routes at a loss and there fore pricing some airlines of some routes?

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