Virgin Narrows Losses
Get More Commentary, Discussion & Market Information On -
The signs of improvements in the finances and the operational returns for Virgin Australia since at the December half way mark continued into the June 30 half resulting in a much better outcome for the airline.
While Virgin Australia made a $185.8 million net loss in the 2016-17 financial year, it became cash flow positive for the first time in five years, the airline accounts and financial report revealed yesterday.
The result for the 12 months to June 30 is a big improvement on the airline’s $224.7 million loss for the same period in 2016.
The airline reported positive free cash flow of $34.3 million, after a $90 million outflow in the previous financial year.
The shares jumped more than 5% to end at 19.5 cents.
Chief executive John Borghetti said the airline had delivered a 40% improvement to its debt position compared to 2014, having cut its borrowings by $839 million.
Mr Borghetti said the group's underlying performance was hit by weak domestic market conditions and the impact of simplifying its fleet. Earnings had improved in the fourth quarter however, coming in $38.4 million ahead of the same period in 2016.
On an underlying basis, which strips out impairment losses and other one off costs, Virgin reported a small loss of $3.7 million, down from a $41 million profit last year but ahead of the $18 million loss analysts had forecast.
“We expect the positive momentum seen in the fourth quarter to continue and that underlying performance for the first quarter of the 2018 financial year will improve compared to the first quarter of the 2017 financial year,” Mr Borghetti said.
Virgin’s international business reported a profit of just $500,000, but that was a near $50 million improvement on 2015-16, as it pulled out of unprofitable routes to Phuket and Abu Dhabi, pushed capacity onto new services to Los Angeles and Hong Kong, and lifted fares by 2.1 per cent.
Budget arm Tigerair Australia tumbled from a small profit in 2016 to a $24.3 million loss, after ending its services to Bali following a dispute with Indonesian authorities.
Its loyalty arm Velocity grew revenue 13% to $371 million, but earnings were constrained to 2% growth because of higher investment in new technology and partnerships.
Mr Borghetti the airline was now on track to deliver $350 million in savings a year by 2019, up from its original $300 million target.
Virgin shares are not actively traded with well over 80% of the company held by a group of mostly foreign airlines - ( HNA of China (19.9%), Nanshan of China (19.98%), Etihad (21.8%), Singapore Airlines (20.1%) and a smaller stake still held by Air NZ (6%?)
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.