Virgin Australia records A$49.7m 1H loss

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Virgin Australia recorded a pre-tax loss of A$49.7 million ($44.6 million) for the first half of its 2014 financial year, as fierce competition took a toll on the carrier.

The airline’s revenue over the six months ended 31 December 2013 rose 5.6% to A$2.22 billion, while net costs rose by 10.9% to $2.28 billion. The airline noted that its unit costs grew by 4.5%, which it blamed on higher fuel costs and lower capacity growth.

Virgin also bore A$49.9 million in "business transformation" costs and an A$18.4 million charge for its share of Tigerair Australia’s losses, resulting in it recording an A$83.7 million statutory net loss.

“This result reflects the tough trading conditions across the entire aviation industry for the first half of Financial Year 2014,” said Virgin chief executive John Borghetti.

By segment, Virgin’s core domestic business recorded earnings before interest and tax (EBIT) of A$25.7 million, compared to A$57.4 million in the previous corresponding period. Borghetti says that the segment was particularly impacted by the significant capacity growth in the market and weakening economic conditions.

On its international operations, the carrier recorded an EBIT loss of A$29.5 million. Chief financial officer Sankar Nayran said during a conference call that although its trans-Tasman joint venture with Air New Zealand performed strongly, short-haul leisure and long-haul routes were adversely impacted by competition and fuel costs.

The airline ended the half-year period with a cash balance of A$896 million, of which A$665 million was unrestricted.

Borghetti says that over the next 18 months, the airline will focus on optimising its business performance and increasing yield.

The airline did not give any profit guidance for the second half, and also declined to give any indication on its fleet and capacity plans.

At the end of the period, the Virgin group had a total of 149 aircraft, including 117 in its mainline fleet, 20 in its charter and other regional operations and 12 in Tigerair Australia.