Virgin Australia records $355 million loss

Virgin Australia records $355 million loss

  • Virgin Australia reveals $355.6 million loss
  • 49% of the loss attributed to restructuring and excess capacity
  • Trans-Tasman business class from February 2015

Virgin Australia has unveiled a loss of $355.6 million over the 2013-2014 financial year, although restructuring costs of $117.3 million and an 'asset impairment charge' of $56.9 million account for 49% of the overall statutory loss.

The latter is primarily attributed to "excess capacity and competitive pressure in the South East Asian market" and comes on the back of the airline retiring one Airbus A330 aircraft, with a second to follow in due course.

Virgin Australia's underlying loss comes in at $211.7 million, which by nature excludes one-off restructuring and other transformation costs.

“While the current environment remains challenging, the Virgin Australia Group has significantly enhanced its strategic position over the last four years and is well placed to capitalise on market recovery”, said Virgin Australia CEO John Borghetti.

To claw its way back into the black, Virgin Australia will sell 35% of its Velocity Frequent Flyer program to Affinity Equity Partners for $336 million.

When asked about other cost cutting and revenue raising measures that could improve the airline's performance, Borghetti said that Virgin Australia "will be prudent on costs – (both in) removing costs and improving productivity ... but not at the expense of the consumer experience."

The flying public "shouldn't assume that the lowest-paid fare will go through the roof," he added.

Orders for Virgin Australia's Boeing 737 MAX aircraft will also be brought forward from 2019 to 2018 as part of a $1 billion program to reduce operating costs and boost productivity and efficiency.

Business class will also replace premium economy on VA's trans-Tasman and Pacific Island flights from February 2015, and both Perth and Darwin will see new airport lounges in 2015.

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Chris Chamberlin
Chris Chamberlin is a senior journalist with Australian Business Traveller and lives by the motto that a journey of a thousand miles begins with a single step, a great latte, a theatre ticket and a glass of wine!
 

11 comments

  • whipper

    whipper

    29 Aug, 2014 10:54 am

    Its funny how all the anti-Qantas trolls are silient on this stinker of a result.

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  • tmsmile

    tmsmile

    29 Aug, 2014 11:01 am

    Just shows how much money the big three Virgin backers are willing to lose in order to hurt Qantas (not helped by the fact that Joyce and Co are incompetent when it comes to fighting back)

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  • woganfan

    woganfan

    29 Aug, 2014 11:46 am

    I assume you mean people commenting on the Qantas dismal performance.  Not everyone is a troll simply bashing Qantas, Qantas management have been disastrous for their shareholders and their customers. I would like the ability to fly Qantas international from Perth but cannot now.  So I am forced on to other airlines where I am then penalised by Qantas loyalty.  This isn't trolling.  It is fact. 

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  • gippsflyer

    gippsflyer

    29 Aug, 2014 12:35 pm

    I'd say there's not much to say, because you expect young businesses in growth phases to run into red ink (particularly in the capital intensive aviation industry). Qantas, on the other hand, is a well established business in the maintenance phase of its life cycle - it already had dominant market share, it just had to maintain it. You'd expect well established business to turn profit easily, and recent entrants to invest for future returns.

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  • tmsmile

    tmsmile

    29 Aug, 2014 12:58 pm

    I would hardly call a 14 year old airline a young business...

    Both results basically show that they went hard at each other's throats and this is the result. The only issue Qantas also had was that it was also competing against international airlines as well as Virgin (who, let's face it, is just domestic).

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  • gippsflyer

    gippsflyer

    29 Aug, 2014 01:22 pm

    Expect VA is a relaunch of what was only a LCC called Virgin Blue. It's a fallacy to suggest the start date of the current business belongs to its very different early incarnation. That's like saying Qantas' current business is no different from when it was predominately a mail and light freight carrier in its earliest days!

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  • tmsmile

    tmsmile

    29 Aug, 2014 02:27 pm

    It's still an established business who for a long time had a stable share of the market. It decided to start going after more market share and so it's now spending more to do that. it's a very simple analogy to say because Qantas is older that it doesn't have to work to keep its customers. As VA is throwing money to lure pax, qantas needs to do the same. Hence red ink everywhere.

    im not saying that the qf management is perfect, but to simply say it should be easy for qf to turn profit easily is frankly foolish.

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  • watson374

    watson374

    29 Aug, 2014 02:52 pm

    While I wouldn't decry it as trolling - it is, of course, a sobering reality - I must say the silence on VA and JB is unnerving compared to the bloodcurdling screams for AJ's head over QF.

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  • gippsflyer

    gippsflyer

    29 Aug, 2014 03:36 pm

    Sorry tmsmile, but that statement simply does not hold water. The Federal Transport dept stats clearly show VA started off with not much market share, which gradually built up over the last couple of years. That was what the airfare war of the last couple of years was all about - Qantas bleeding money to protect its majority market share (by flooding the market with over-allocated capacity, meaning plenty of cheap seats), VA paying over the odds to steal customers away from Qantas. You even state as much in your comments, while still trying to hold to this idea that both are/were mature businesses. 

    If Qantas/Joyce wasn't so he'll bent on its/his flawed S-curve market dominance theory, Qantas could have easily managed its resources to maintain its decent profit margin. Simply put, Joyce overplayed his hand and the airline/the industry paid the price accordingly.

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  • DB

    aussieboyaussie

    29 Aug, 2014 12:20 pm

    A Virgin lounge in Hobart would be awesome thanks.  ASAP.

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  • leisuretraveler

    leisuretraveler

    29 Aug, 2014 12:43 pm

    JB has spent the extra funding that his foreigh  airlines gave Virgin so it will be interesting to see VAH financial results in  6 months time and whether they will have to put extra money in again.

    Could JB be looking for a new job before AJ?

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18 Jun, 2019 07:28 am

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