PROFIT PLUMMETS FOR VIRGIN
Written on the 25 August 2011
VIRGIN Blue Holdings (ASX:VBA) has copped the brunt of a heated Aussie dollar, had less planes in the sky due to natural disasters and faced an international tourism plummet to record a net loss of $67.8 million for FY11.
Today’s result was in line with guidance of guidance of losses between $30m to $80m announced on March 23, 2011 and includes $36m in unrealised foreign exchange loss due to the rising AUD. It compares with a profit of $21.3 million last FY.
Virgin Australia chief executive John Borghetti, says FY11 presented enormous challenges as Virgin restructures.
“Today’s financial results reflect the impact of an unprecedented series of external events and reinforce the importance of our Game Change Program strategy to increase our share of the more resilient corporate and government markets,” he says in statement to the ASX.
“Despite the tough operating conditions, we kept our focus on repositioning the airline. Thanks to the outstanding dedication and efforts of our staff and management, over the past 12 months we have redesigned the in-flight and ground guest experience, secured a single strong global brand for the entire Group, established a global network with little additional capital expenditure through alliances and integrated our airline operations to drive efficiencies.”
Borghetti is confident the company’s ‘game change program’ will continue to achieve milestones and is on track for material benefits in FY12.
It includes; a re-launched of the airline, with major product changes and new unified brand and the development of a global virtual network: Etihad Airways, Air New Zealand, Delta Air Lines and Singapore Airlines (subject to regulatory approval). The airline announced today that it had reached agreement with Virgin Atlantic to code share on their Sydney to Hong Kong service from early 2012.
Despite total revenue increasing 9.7 per cent to $3.27 billion, on the prior corresponding period, Borghetti says the airline was affected by natural disasters in key markets.
“Over the past 12 months, Virgin Australia has been affected by an extraordinary series of natural disasters in our key markets, including the Queensland floods and cyclone, earthquakes in Christchurch and the eruption of Chilean and Indonesian volcanos,” he says.
“This also coincided with a spike in fuel prices which directly impacted our operating costs and was only partially recovered through fuel surcharges. Going forward, the combination of fuel surcharges, more active hedging policies and a continued strong cost focus will ensure that Virgin Australia is well placed to operate in a high fuel cost environment.
“That being said, the 2011 financial year, in particular the second half of the year, has been one of major transformation for Virgin Australia and we remain firmly on track with our strategy. We have relaunched our product, secured one unified brand, created a global network and today we have announced the re-launch of Virgin Australia’s frequent flyer program, Velocity.”
The company is unable to provide specific guidance for the coming year.
“There are early indications of improving earnings in Financial Year 2012, with positive trading results in July and continued strengthening in the government and corporate markets,” says Borghetti.
“We are confident we have the right strategy to manage our response to changes in future market conditions and to ensure a stable and successful future for Virgin Australia.”
VBA shares are trading at $0.23.