Written on the 29 August 2014

VIRGIN Australia (ASX: VAH) has posted a loss, claiming the financial year was one of the most difficult in the history of Australian aviation.

VAH reported a statutory loss after tax of $355.6 million, three times the previous loss of $98.1 million.

The underlying loss before tax of $211.7 million was in line with market expectations.

The company cited market competition, weak consumer sentiment, continued economic uncertainty and the $51.6 million cost of the carbon tax as key hindrances to the result.

VAH was also impacted through its 60 per cent share in Tigerair Australia, which lost $46.1 million over the year.

CEO John Borghetti says underlying revenue performance was impacted by these challenging operating conditions.

“The 2014 financial year has seen one of the most difficult operating environments in the history of Australian aviation,” says Borghetti.

“While the Virgin Australia Group performed well in attracting high yielding passengers and containing cost growth over the full year, underlying revenue performance was impacted by the challenging operating conditions.”

VAH did have standout performances in some divisions throughout the year however.

The airline’s staff won the 2014 Best Airline Staff Service Award in the Australian/Pacific region at the Skytrax World Airline Awards for the fourth consecutive year.

VAH’s Velocity program also proved a winner, with the database now totalling 4.5 million members strong.

“Over the 2014 financial year, we have further increased revenue from the corporate and government market segment, which now represents more than 25 per cent of our domestic revenue, far exceeding our original goal of 20 per cent.

“Furthermore, our success in integrating the Skywest business has enabled us to significantly grow revenue from the charter segment, increasing comparative revenue by around 30 per cent on the 2013 financial year.

“We have also positioned our loyalty program Velocity Frequent Flyer as a significant value driver for the group, with the highest annual membership acquisition in the program’s history and a significant increase in member engagement.”

VAH announced with the results that it will sell a 35 per cent stake of its Velocity loyalty program to Asian private equity firm Affinity Equity Partners, which will earn the company $336 million.

Velocity and VAH’s charter business are pinned as promising the most growth for the company, and freight is expected to treble to between $150 million and $200 million by mid-2017.

Borghetti hasn’t provided guidance for the year ahead with the announcement, but drew attention to the company being midway through its five year restructuring program.

“Over the next three years, the Virgin Australia Group will focus on six key areas: capitalising on growth business opportunities, driving yield enhancement, implementing a new cost program, optimising the balance sheet.

“Setting a new standard in customer experience and developing our people to their full potential.”






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