Borghetti says Virgin on track for profitability in 2015/16

written by australianaviation.com.au | August 7, 2015

BOEING 737 800 VIRGIN AUSTRALIA BNE APR15 RF 5K5A0743Virgin Australia chief executive John Borghetti says the airline group is on track to return to profitability in 2015/16 as market conditions improve.

Borghetti says Virgin and its wholly-owned low-cost carrier Tigerair are on a “positive trajectory”, with unit revenue increasing, unit costs decreasing and operational performance and customer satisfaction continuing to improve.

“As a result of the progress on our strategy to date, we are now on a positive trajectory and on track to significantly improve financial performance again for the 2016 financial year,” Borghetti said in a statement on Friday.

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“Based on current market conditions, all fundamental business metrics are on track for the Group to return to profitability and report a return on invested capital in line with its cost of capital for the 2016 financial year.”

As previously reported, Virgin posted a full year net loss of $93.8 million for the 12 months to June 30, an improvement of $260 million from the prior corresponding period.

On Friday, Virgin provided more details of its financial performance.

The airline group said Virgin’s domestic network recorded underlying earnings before interest and tax (EBIT) of $111.1 million in 2014/15, up $210.1 million compared with the prior corresponding period.

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“Operating margins improved from -3.1 per cent to +3.4 per cent,” Virgin said, while domestic revenue grew 4.8 per cent on the 2014 financial year on capacity growth of 1.3 per cent.

“The business remains on track to reach its target of 30 per cent of revenue from the Corporate and Government segment by 30 June 2017,” Virgin said.

However, Virgin’s international network continued to struggle in 2014/15. Its overseas flying suffered an underlying EBIT loss of $68.9 million in the 12 months to June 30 2015, a decline of $22.8 million from the prior corresponding period.

Revenue from its international operations fell 3.3 per cent, while capacity was reduced by 0.4 per cent.

“Increased competitive pressure, particularly in the South East Asian and long-haul markets, constrained yield recovery during the financial year,” Virgin said in a statement.

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