Virgin Australia has delivered its strongest first-half result in 11 years, with its underlying profit before tax rising 37% to A$112 million ($79.5 million).
Revenue across the airline group for the six months to December 2018 rose 10% to A$3.07 billion, which it attributed to stronger yields and load factors across its domestic network, as well as the expansion of its Asian long-haul network.
Net profit after tax soared to A$73.8 million, up sharply from the A$4.4 million in the previous corresponding period. That included A$24.6 million in restructuring costs largely associated with its fleet simplification programme.
“A key contributor to these headline figures is the performance of our domestic business, which continues to maintain its robust position in the market,” commented chief executive John Borghetti during the airline’s earnings call.
The mainline domestic operations reported earnings before interest and tax (EBIT) of A$177 million, up 27%. RASK improved by 7.1% while yield was up 6.3%, which the airline attributed to “disciplined increase in capacity flown.”
The international network delivered an EBIT loss of A$12 million, more than triple to loss of A$2.7 million in the previous corresponding period, despite revenue increasing 15% to A$666 million. Virgin noted that the network was impacted by a A$32.3 million fuel and currency headwind, while there were also start-up costs associated with its Sydney-Hong Kong launch.
Budget unit Tigerair Australia reported a modest improvement in EBIT loss to A$8 million, with the result tarred by accelerated depreciation from the reduction in the carrier’s fleet. Nonetheless, RASK increased 13% and yield 14.2%, which Virgin says reflected network optimisation.
Cash and cash equivalents at 31 December amounted to A$1.25 billion, down from A$1.42 billion at the start of the period, largely reflecting a A$266 debt repayment.
In its outlook, the carrier says that based on forward bookings it expects its third quarter revenue to grow by at least 7%, but it declined to give any more guidance due to “uncertain market conditions”.
Borghetti commented on the call that “domestically, Australia is in very good shape”, pointing out that the uncertainties were largely around oil prices and other broader geopolitical factors.