Excess capacity, weak consumer confidence and carbon tax hit Virgin Australia.
Virgin Australia has just released its 2013/14 financial results, with ceo John Borghetti saying it had been “one of the most difficult operating environments in the history of Austalian aviation.”
The airline’s “underlying loss” before tax of $211.7 million was in line with market expectations, he said, and while the group “performed well in attracting high yielding passengers and containing cost growth over the full year,” underlying revenue performance was impacted by the challenging operating conditions.
Borghetti said the year had seen the group further increase its share of the corporate and government market segments, which now represent more than 25% of Virgin’s domestic revenue.
The Velocity Frequent Flyer loyalty program grew to 4.5 million members, while interline and codeshare revenue increased 10.2% and the integration of the Skywest business had also seen a significant increase in charter revenue.
Virgin incurred $117.3m in restructuring costs, and has booked an “asset impairment charge of $56.9 million” driven by excess capacity and competitive pressure in the South East Asian market – primarily excess capacity on short-haul international markets, particularly on the Bali route – while the $48.7m impact of “equity accounted losses” meant the overall statutory result was a pre-tax loss of $484.1 million.
VA’s share of losses in Tigerair Australia amounted to $46.1 million – or about $1 million per week – but Borghetti said this should be viewed in the context of overall industry performance and weak consumer confidence, with the low-cost offshoot “now well positioned to benefit from a recovery in the domestic market when conditions improve.”
Borghetti said now that VA’s Game Change Program was complete the next phase for the carrier is “Virgin Vision 2017” which will aim to make the carrier “Australia’s favourite airline group.”
MEANWHILE Virgin Australia has also today announced the sale of a 35% stake in the Velocity Frequent Flyer program to Affinity Equity Partners for $336 million.
Velocity will remain under the Virgin Australia Group, but a separate board will be created with majority representation from the airline.
“The program remains a key value driver for the Virgin Australia Group, and through access to additional capital and resources this transaction will allow us to accelerate the program’s strategy and realise its full potential as a world class loyalty business,” Borghetti said.
More information in today’s Travel Daily.