By The Numbers

843 billion statutory net loss for the 12 months to June 30 2014, a figure impacted by writedowns to the carrying value of the Qantas’s Airbus A380, Boeing 747-400 and Airbus A330 aircraft in preparation for a proposed split of its domestic and international operations.

Underlying profit before tax, which Qantas regarded as the best indication of its financial performance, fell to a loss of $646 million, from underlying profit before tax of $186 million in 2012-13.

Despite what he described as a confronting set of numbers, Joyce said they represented the past given the transformation plan that was announced in February was creating a “leaner, more focused, and sustainable Qantas Group”.

“We have now come through the worst,” Joyce told reporters in Sydney on August 28.

“Our work is on track and we will see accelerating benefits in the coming year.

”Joyce said the Qantas Group was expected to return to underlying profit before tax in the first half of 2014/15, from a $252 million loss in 2013/14.

“There is a clear and significant easing of both international and domestic capacity growth, which will stabilise the operating environment,” Joyce said.

“We therefore anticipate a rapid improvement in the group’s financial performance in financial year 2015.

”Qantas said capacity increases in both the local and international markets had hurt yields.

On the domestic front, Qantas said its mainline and Jetstar brands posted a combined $50 million in earnings in 2013/14.

By contrast, Qantas Domestic alone had $365 million in underlying earnings before interest and tax (EBIT) in the prior year.

“Domestic market yields and revenue seat factor were adversely impacted by market capacity growth running ahead of demand for the second successive year,” Qantas said.

“Business and leisure demand remained weak throughout the year, with corporate account revenueCHONGimpacted by softening resources sector demand, particularly in the Western Australia and Queensland markets and reduced government spending.

”Figures from the Bureau of Transport, Infrastructure and Regional Economics showed domestic capacity, measured by available seat kilometres, rose by 2.

3 per cent in 2013/14.

However, revenue passenger kilometres was up by just 1.

3 per cent, resulting in load factors dropping 0.

7 percentage points to 76 per cent.

Qantas said in May it would have flat capacity growth in the domestic market across both its Qantas and Jetstar brands and at the results announcement extended that capacity freeze for a further three months, meaning no capacity growth for the first half of 2014/15.

“We believe this to be appropriate given underlying market conditions,” Joyce said.

Qantas’s International operations had another difficult year, with capacity increases and higher fuel costs hitting hard and leading to an underlying EBIT loss of $497 million, compared with a loss of $246 million in 2012/13.

On that front too things were looking a little more positive, with international competitor capacity growth in Australia expected to be below three per cent for the first half of 2015, compared with an average growth rate of eight per cent over the past four years, Joyce said.

Joyce described Qantas International as a great airline with a great reputation, but one saddled with a cost base that was too high.

“That business is growing in areas where it can make money,” Joyce said, citing recent announcements of extra frequencies to the USA and South America.

Qantas said the transformation plans had resulted in 2,500 jobs being made redundant, with a further 1,000 to go in the current financial year and another 1,000 in 2015/16 and 2016/17.

Qantas also announced it would not sell its Loyalty business, which improved underlying EBIT by 10 per cent to $286 million.

“We have decided there was insufficient justification to do it,” Joyce said.

“That has been the outcome of this review.

”Virgin Australia chief executive John Borghetti says the market is slowly catching up with the excess capacity swirling around in the domestic market.

However, he admits there is still a long way to go.

The softening in the national economy, coupled with a weaker Australian dollar and the huge influx of additional seats in the local and international markets pushed Virgin Australia to a statutory net loss of $355 million in 2013/14.

It was, Borghetti says, one of the most difficult operating environments in the history of Australian aviation.

Although Virgin declined to provide earnings or capacity guidance for the current year, citing an uncertain economic environment, Borghetti says there may be some light at the end of the tunnel with supply coming closer to matching demand.

“It is very hard to see beyond six months to be frank but certainly from what we are seeing now the two lines appear to be getting closer,” Borghetti told reporters at the company’s full-year results presentation in Sydney on August 29 in response to a question.

“Clearly the market is still going at about three or 3.

5 per cent and if you see capacity growing at a rate less than that then the gap gets smaller.

“But there is a hell of a gap.

”Underlying profit before tax, was regarded as a better indication of the airline’s financial performance, came in at a $211.

7 million loss, broadly in line with market estimates of a $210 million loss.

Revenue rose 7.

1 per cent to $4.

31 billion.

Virgin Australia’s domestic operations suffered an earnings before interest and tax (EBIT) loss of $86.

9 million in the 12 months to June 30 2014, compared with a $2.

3 million loss in the prior corresponding period.

Meanwhile, its international operations swung to an EBIT loss of $80.

2 million, from a profit of $8.

3million a year ago on the back of weakness on routes to Bali and Phuket.

On a positive note, Virgin’s proportion of revenue from the corporate and government sector rose to 25 per cent, and the goal was to hit 30 per cent by 2016/17.

Yields – or average airfares per passenger – rose 1.

2 per cent.

On the back of last year’s capital raising that resulted in its airline partners – Singapore Airlines, Air New Zealand and Etihad – taking seats on the board, Virgin made a further move to shore up its balance sheet with the partial sale of its Velocity frequent flyer program to fund manager Affinity Equity Partners.

The 35 per cent stake was expected to bring in $336 million to Virgin’s coffers and reduce Virgin’s lease-adjusted balance sheet gearing by eight per cent.

It also valued the frequent flyer business at $960 million.

“Critically important, going forward, optimising the balance sheet will be central to our strategy,” Borghetti said.

Velocity currently has 4.

5 million members, with a target of having seven million members by 2016/17.

The move to sell part of Velocity was in contrast to Qantas’s decision not to offload a stake in its Qantas Loyalty division, although Borghetti said the two situations were different.

“In our view, the other program has reached maturity.

Ours has not,” Borghetti said.

“Ours is only just taking off and what we want to do is make it takeoff a lot faster and turbocharge its development.

”The 2017 targets for Velocity membership levels, corporate and government revenue and yield improvement were part of Borghetti’s Virgin Vision 2017 for the next three years.

“We have invested in order to grow and to ensure a strong future for the business,” Borghetti said.

“We are focused on achieving profitability in financial year 2017.

”