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Virgin Australia optimistic despite annual loss

Petrina Berry  |  10 Aug 2017Text size  Decrease  Increase  |  

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BRISBANE - [AAP] Weaker demand for domestic flights has sent Virgin Australia (ASX: VAH) to an annual loss but the airline says a recent improvement in conditions is set to continue.

Virgin Australia made an underlying pre-tax loss of $3.7 million in the year to June 30, down from the previous year's $41 million profit, due to a fall in earnings in its domestic business and the cost of changes to its fleet of aircraft.

Weaker demand for corporate and leisure travel contributed to a 69 per cent fall in underlying earnings in Virgin Australia's domestic operations, the largest segment of its business.

However, the airline said underlying earnings in the final three months of the financial year improved from the same period a year earlier, and chief executive John Borghetti forecast a similar trend in the first three months of the current financial year.

"Business confidence seems to be running ahead of consumer confidence and that translates into what we have seen in the last quarter, where business travel has picked up more than leisure travel, and that translates into better yields," he told reporters.

The company has been reducing its capacity on domestic routes in response to subdued demand.

Its TigerAir Australia business posted an underlying loss as the impact of its withdrawal of operations to Bali outweighed an improved performance on domestic routes.

Virgin Australia's international business returned to profit, with underlying earnings of $500,000, after the company stopped its loss-making flights to Abu Dhabi and made improvements to its business class.

The company's underlying pre-tax loss was smaller than market expectations of an $8.8 million loss, and its shares were up one cent at 18.5 cents at 1300 AEST.

Virgin Australia's statutory net loss of $220.3 million in the 2016/17 financial year was an improvement on the previous year, and included $142 million in costs related to its restructuring program.

The first year of its three-year plan mainly involved changes to its aircraft fleet and routes, and staff cuts.


* Full year underlying pre-tax loss of $3.7m, from prior year's $41m profit

* Net loss of $220.3m, from $260.9m

* Revenue up 0.5pct to $5.05bn

* No final dividend, unchanged


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