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Virgin expects to post $30-60 million underlying profit for full 2015/16 year

written by australianaviation.com.au | May 2, 2016

A Virgin Australia ATR 72-600. (ATR)
Virgin is removing surplus ATR capacity on regional routes. (ATR)

Virgin Australia says the airline group is on track for a full year profit despite a forecast second half loss amid weak demand in its key domestic market that has prompted capacity cuts focused on regional routes.

The company reported a statutory loss after tax of $58.8 million for the three months to March 31, compared with $28.3 million loss in the prior corresponding period. Virgin said the bulk of the deterioration in the statutory result was due to restructuring charges such as the removal of surplus capacity due to the resources downturn.

Underlying profit before tax, which removes one-off costs and was the airline’s preferred measure of financial performance, was $18.6 million, an improvement from the $22.2 million underlying pre-tax loss a year ago.

“While the group improved its underlying performance in this quarter, it was against a challenging operating environment,” Virgin chief executive John Borghetti said in a statement on Monday.

“This environment has been impacted by weak consumer demand and sentiment, uncertainty around the federal election and the resources sector downturn.


“As a consequence, we will reduce group capacity by 5.1 per cent in the fourth quarter, with domestic reductions focused on regional routes.”

Borghetti said the fleet restructuring would offer “significant cost savings going forward”.

Virgin said it expected its 2015/16 full year underlying profit before tax to be in the range of $30 million to $60 million. The compared with an underlying loss before tax of $49 million for the 12 months to June 30 2015.

The full year guidance points to a second half loss of between $20 million and $50 million, given Virgin posted underlying profit before tax of $81.5 million in the 2015/16 first half.

Virgin’s assessment of the state of the domestic market mirror those of its local rival Qantas, which said on March 30 it planned to put the brakes on domestic market growth due to weaker-than-expected demand.

“Some softness in demand, related to the upcoming federal election and recent drop in consumer confidence in Australia, began to emerge over the peak Easter and school holiday period in late March and continued to be seen in forward bookings in April and May,” Qantas said on April 18.

“Traffic over the peak Easter and school holiday period from late March fell below expectations, compounded by a disconnect in the timing of Easter and school holidays in most Australian states.”

The company’s third quarter traffic statistics showed both its Virgin and Tigerair domestic operations grew capacity, measured by available seat kilometres (ASK), and the number of passengers carried.

Virgin domestic flew 4.1 million passengers in the three months to March 31, up 1.6 per cent from the prior corresponding period, while ASK’s also rose by 1.6 per cent. Load factors were 1.1 percentage points higher at 75.4 per cent.

At Tigerair, passenger numbers rose 14.7 per cent increase to a little over 1 million, while ASKs were 14.1 per cent higher. Load factors eased 0.2 percentage points to 85.5 per cent.

Virgin’s international network posted a slight decline in passenger numbers and capacity. At the end of March, Virgin handed over its flights to Bali from Melbourne, Adelaide and Perth to Tigerair. And its international capacity was also expected to be affected in the final three months of 2015/16 as its Boeing 777-300ER fleet has new business class seats installed, resulting in the temporary suspension of its three-times weekly Sydney-Abu Dhabi service between April and July.

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Comments (10)



    Poor result, this business needs a major overhaul and some new thinking instead of following Qantas routes like sheep and offering nothing new in the market. They should look at some destinations like Townsville to Melbourne, Townsville – Adelaide, Newcastle – Adelaide, Hobart to Adelaide amongst others, they don’t have to be daily, maybe 3 a week or something, just mix it up a bit, this business is stagnant.

  • james


    Good luck paying back the 100 million dollar mayday loan on the 30 mil profit.

  • Paul Rodgers


    Too many different types of Jets! Virgin has 4 types, 737 777 A332 and Embraer, Qantas mainline has same number of types, 744, A380, A330 and 737, yet Qantas is a vastly bigger Airline, and thus benefits from the economies of scale of operating a minimum of 12 units per Aircraft type.

  • Paul


    A good start would be to stop decreasing the earning potential of the Frequent Flyer Program and make it more competitive with the offering from Qantas. Reducing the Virgin Flyer card from 1 point per dollar to 0.66 per dollar and spend with Virgin Mobile from 3 points per dollar to 2 does not bode well for customer loyalty to this program or in turn to Virgin Australia.

  • Fred


    I have heard a rumour today the Virgin Australia have made an offer to takeover REX and SQ will be buying out the NZ share they are selling. Has anyone heard a similar story? I trust the source but I have my doubts.

  • Freddie


    All of this is starting to sound like a broken record. Friends and a relative who work for Virgin say is definately not the Company that you should aspire to work for. It is driving its workforce into the ground and just how do they intend to turn the business around to achieve such a profit in a short time frame. You’ve got to be joking yourself as nobody else is buying it.

  • croppo


    i only wish virgin was flying brisbane to hervey bay, might cut the cost of qantas link charging what they want cos they are the only airline flying this route

  • Mark


    As we approach the end of a massive rebranding and restructure of Virgin, I think we will see a very profitable airline from next year onwards. Even more interesting is what SIA will do when they ultimately gain complete ownership. Just remember the hard times Qantas had to go through before the glory days returned.

  • k lane


    Perhaps time to hand over the international long-haul business to partners with scale

  • franz chong


    they should bring back the Australia to Hong Kong flights using VA.Cathay Pacific if one is a velocity member is not an option.

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