Virgin Australia has reaffirmed expectations of an improved financial showing and positive free cash flow for the 2016/17 financial year.
The airline group provided the updated earnings guidance in a statement to the Australian Securities Exchange (ASX) on Monday.
Virgin said it expected to report positive free cash flow of up to $50 million for 2016/17, which would be an improvement of up to $140 million on the prior year.
Further, the airline said it has also improved its cash balance and reduced debt in the fourth quarter of the 2016/17 financial year.
“The Group also reconfirms its previous statement that it expects the underlying performance of the group for the 2017 financial year to improve on the fourth quarter of the 2016 financial year,” Virgin told the ASX.
Virgin posted underlying profit before tax, which does not include one-off charges and was regarded as the best indication of financial performance, of $41 million for 2015/16.
However, Virgin suffered a $224.7 million statutory net loss for the 12 months to June 30 2016 due to one-off charges and restructuring costs totalling $440.5 million due mainly to fleet changes such as the removal of Embraer E190s and ATR turboprops and the transition of Tigerair Australia from an all-Airbus A320 operator to the Boeing 737.
The airline’s cost reduction initiatives, dubbed the Better Business program, was targeting $300 million in net free cash flow savings per year by the end of 2018/19.
In late June, S&P Global Ratings, formerly known as Standard and Poor’s, said it had reaffirmed Virgin Australia’s “B+” corporate credit rating while lifting the ratings outlook to stable, from negative previously.
The ratings agency noted Virgin’s transformation from a budget carrier formerly known as Virgin Blue to a diversified airline group covering domestic, regional, international, freight and frequent flyer units was “substantially complete”, with the focus now on cash generation.
“The stable outlook reflects our growing confidence that Virgin has a realistic deleveraging path as the airline turns to generating cash, supported by steady market conditions,” S&P Global Ratings said in a statement.
In May, the airline group reported a statutory net loss after tax of $69 million for the three months to March 31 2017, a deterioration from a loss of $58.8 million in the prior corresponding period.
The underlying before tax loss came in at $62.3 million, from underlying profit before tax of $18.6 million a year ago.
Meanwhile, Virgin said its Velocity Frequent Flyer program reached eight million members in June and had achieved positive earnings before interest and tax (EBIT) growth of between 10-13 per cent in the second half of 2016/17.
“For the entire financial year, Velocity’s Segment EBIT performance will improve by 2-3 per cent on the 2016 financial year,” Virgin said.
In other Virgin news, the company announced on June 30 Bruno Mathew had stepped down as Etihad Aviation Group’s nominee on the board. He has been replaced by Etihad Aviation Group chief group support services officer Harsh Mohan.