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Adverse market conditions in the second half of FY19, new route investments, and increased fuel costs have resulted in Virgin Australia (ASX: VAH) posting an underlying loss of $71.2 million.
However, the statutory loss after tax of $315.4 million for FY19 is a significant improvement from FY18's $653.3 million loss, up 337.9 per cent.
These self-described "disappointing" results will see the airline cut 750 jobs in an attempt to turn the business around.
The company reported an increase in total revenue of 7.6 per cent to $5.8 billion for the full year.
The second half of the financial year saw demand soften, which Virgin attributes to the timing of the Easter holiday period and the Federal Election, the latter of which slowed demand in the corporate and leisure travel sectors.
Like Qantas, Virgin was also slogged with the increased fuel and foreign exchange costs, which totalled $158.8 million for the airline.
Virgin says its statutory loss after tax of $315.4 million was impacted by a $223.2 million restructure cost.
As a result of its review there has been a $152.6 million non-cash impairment of the assets of the Virgin Australia International and Tigerair businesses.
"The group is responding to these challenges with a series of immediate improvement initiatives to streamline operations and reduce costs," says Virgin.
"These include a simplified organisational structure, organisational rightsizing program, fleet and network capacity review and a group-wide review of supplier contracts. These initiatives are being implemented whilst the group's ongoing strategic review is undertaken to improve business performance."
This review will see around 750 Virgin corporate and head office staff made redundant, representing $75 million in savings by the end of FY20.
Virgin Australia CEO Paul Scurrah says the FY19 results were "disappointing".
"There is no doubt that we are operating in a tough economic climate with high fuel, a low Australian dollar, and subdued trading conditions," says Scurrah.
"However, today's results show that we must improve our financial performance. While we have continued to grow revenue and have a strong loyal customer base, we need to make changes to our costs to ensure we see financial benefit from the growth in our business."
Breaking down the group's results, Virgin Domestic reported underlying earnings of $133.4 million, down from $215.7 million thanks to $87.6 million in fuel and foreign exchange headwinds.
Virgin International reported an underlying EBIT loss of $75.6 million, but total revenue increased 16.5 per cent to $1.3 billion.
Virgin's budget airline Tigerair reported an underlying EBIT loss of $45 million, down from a FY18 loss of $39.5 million.
The company's loyalty program Velocity was a big earner, scoring the company an EBIT profit of $122.2 million, up from $110.1 million during FY18.
The program increased revenue by 10.5 per cent to $411 million and attracted more than 680,000 new members during the financial year.
Virgin says the start of FY20 has seen a continuation of the softer conditions witnessed during 2H19. The group expects further FY20 fuel and foreign exchange headwinds of approximately $100 million.
Shares in Virgin are down 9.09 per cent to $0.15 per share at 10.24am AEST.
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Business News Australia
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