Virgin says losses narrowed in first quarter of 2014/15

Virgin did not provide a comparable figure for the 2013/14 statutory first quarter result in its statement on Friday.

The airline said yields – an industry term measuring average airfares per passenger – in the domestic market were “positive” compared with 2013/14.

“The results reflect an improved performance compared to the prior corresponding quarter, despite ongoing weak consumer sentiment,” Virgin chief financial officer Sankar Narayan said in a statement.

“While the leisure segment has remained subdued, we have delivered further growth in the corporate and government segment.”

Narayan noted that the first quarter of the new financial year was traditionally a weaker quarter compared with the three months to December 31.

Virgin said underlying cost per available seat kilometre rose by less than one per cent, and Narayan indicated there were more benefits to come under the recently announced cost reduction program.

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The release of financial results was also accompanied by Virgin’s first quarter operating statistics, which showed the airline increased capacity by 0.6 per cent in the Australian domestic market.

Despite the capacity discipline, load factors fell one percentage point to 77.2 per cent and the number of passengers carried slid 1.9 per cent to 4.47 million.

Both Virgin and Qantas have slowed domestic capacity growth so far in 2014/15, in the hope the market would absorb the extra seats added into the market over the past year that left both airline groups in the red for 2013/14.

However, while their mainline Qantas and Virgin operations were exercising caution on capacity – Qantas and QantasLink reduced ASKs 2.8 per cent in July and August – their low-cost offshoots Jetstar and Tigerair Australia have continued to pour additional seats into the local market.

Tigerair grew available seat kilometres (ASK) 9.3 per cent in the three months to September 30. That capacity growth was matched by a 5.6 per cent increase in passengers carried, resulting in load factors rising half a percentage point to 90.2 per cent.

Figures from Qantas published earlier in October showed Jetstar Domestic lifted ASKs by 4.5 per cent in July and August. (The September figures were yet to be published.)

Based on ASKs, Jetstar Domestic was about three times the size of Tigerair Australia.

Virgin said its share of equity accounted loses at Tigerair Australia was $11.6 million in the quarter, up from $9.7 million in the prior corresponding period “as a result of ongoing subdued consumer sentiment”. The losses from Tigerair Australia were not included in Virgin’s underlying result.

In a separate announcement, Virgin said it planned to buy the remaining 40 per cent of Tigerair Australia that it did not already own from Singapore-based Tiger Airways Holdings for A$1 and take full control of the loss-making budget carrier.