Virgin posts loss, but insists it is "stronger than ever"

Virgin posts loss, but insists it is "stronger than ever"
By admin


Although the 2013 financial year has seen Virgin Australia tumble $98 million into the red, chief John Borghetti insisted it had been a pivotal year for the airline with it emerging “stronger than ever”.

The statutory loss after tax was in line with previous guidance of a loss of $95 to $110 million, nonetheless Borghetti called it “disappointing” with the airline feeling the pinch of the carbon tax, high levels of competition and hefty one-off transformation costs.

But he highlighted a series of milestones achieved during a “very difficult” year, including the conclusion of three major transactions, which saw it take a 60% stake in Tigerair Australia and acquire 100% of Skywest while Singapore Airlines took a 19.9% stake in Virgin.

“Any one of those transactions is big in itself but we did three in one year,” Borghetti told a press briefing in Sydney this morning.

“The end result is that we are a very strong competitor in every sector of the Australian aviation market.”

The airline also transitioned to the SabreSonic system, a move which also impacted its bottom line as economic conditions hindered its recovery in the aftermath of the switch. But the benefits of the switch are now being seen, with the airline now able to access later bookings and grow its penetration in global markets.

The end of the 2013 financial year marked the completion of the third year of the airline's five year Game Change Plan – a strategy which is now starting to bear fruit, according to Borghetti.

He pointed to four months of yield growth, strong forward sales and positive revenue in June and July.

"The hard work is behind us," he said.

The year also saw the airline achieve its network optimisation goals which entailed building frequency on key business routes, specifically the Sydney-Canberra-Melbourne triangle, he revealed.

Looking forward, Borghetti anticipated capacity growth of between 3% and 4% in the first half of the year – higher than Qantas’ expectation of growth in the order of 1.5% to 2%. However, Borghetti maintained that “chasing market share has never been a priority for us”.

Although he claimed Virgin’s share of the domestic market has risen to 34%, he insisted the figure is “irrelevant”.

“It’s a consequence of the strategy, it’s not a strategy,” he said. “There is no golden number.”

Capacity growth forecasts do not include Tigerair, he added, declining to reveal details of the low cost carrier’s expansion plans.

However, he did comment that an improvement in the troubled low cost carrier’s fortunes is “already being seen”.

“Load factors in July reached 92% and it’s now the leading low cost carrier in this market for customer satisfaction,” he said.

In a separte announcement, Air New Zealand, Etihad Airways and Singapore Airlines confirmed they would each separately provide Virgin Australia funding totalling $90 million. The unsecured loan facilities, for a term of one-year, are to “further supplement and diversify Virgin’s liquidity position” with Borghetti describing the move as a sign of confidence in the airline’s outlook.

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