Virgin Australia has flagged an underlying profit before tax of about $10 million for the first half of 2014/15 amid lower fuel prices and improving conditions in its core domestic market.
The company said on Friday underlying profit before tax – which the airline regarded as the best indication of financial performance – came in at $55.3 million for the second quarter of 2014/15, a $47.6 million improvement from the prior corresponding period.
“For the financial year-to-date ending 31 December 2014, this equates to an underlying profit before tax of $10.3 million,” Virgin said in a statement.
Virgin was due to release its full financial results for the first half of 2014/15 on February 19.
It reported a pre-tax loss of $49.7 million in the first half of 2013/14.
“We are seeing some improvement in domestic trading conditions compared to the first quarter,” Virgin chief financial officer Sankar Narayan said in the statement.
“However, consumer sentiment has been relatively weak and international yield recovery has been constrained by continued pressure in the South East Asian and Europe/United Kingdom markets.”
Virgin said yields – an industry term measuring average airfares per passenger – both in the Australian market and across the airline group rose in the second quarter of 2014/15.
There was also a $7 million reduction in fuel costs compared with the prior corresponding period due to weaker oil prices, which Virgin described as a “small benefit”.
Virgin said net profit after tax was $11.3 million for the three months to December 31 2014. It did not provide a comparable figure for the prior year.
However, an analysis of its results from the first half of 2013/14 and the first quarter of 2014/15 indicates the airline was likely to report a statutory net loss in the vicinity of $47 million for the six months to December 31 2014.
This compared with a statutory net loss of $83.7 million in the 2013/14 first half.
“This result represents a continued turnaround on the prior corresponding period and the seasonally weaker first quarter,” Narayan said.
“We are delivering on our plan to maintain our cost advantage through the disciplined execution of our cost reduction program, while continuing to drive revenue growth from the corporate, government and charter market segments.”
Virgin has moved to quarterly reporting of its financial results, in line with one of its major shareholders Singapore Airlines.
Meanwhile, Virgin said it has completed the its takeover of Tigerair Australia and now owned 100 per cent of the low-cost carrier.
Virgin said on Friday Tigerair Australia posted an underlying profit before tax of $0.5 million in the second quarter, an improvement from the $15.5 million underlying loss in the prior corresponding period.
“This result was driven by both improved unit revenues and greater cost efficiencies and represents the first quarterly profit for the airline since December 2010,” Virgin said.
Narayan said completing the purchase of the remaining 40 per cent of Tigerair Australia that it did not own from Singapore-based Tiger Airways Holdings was an “important step in its pathway to sustainable profitability”.
“We remain focused on maintaining Tigerair Australia’s low cost business model and a separate brand, whilst ensuring there is a viable low-cost alternative in the market for consumers,” Narayan said.