The last of the regions’ airlines to post Financial Year ’13 results was Virgin Australia. The Virgin Australia Group posted a statutory loss of $98 million dollars, on slight 2.5 per cent increase in revenue to $4.02 billion.
Virgin Australia’s result was no surprise, with the results in line with the significant profit downgrade announced in May. However, it wouldn’t be Virgin without flair to artfully put a positive spin on such a poor result; CEO John Borghetti highlighting a “pivotal” year of challenges and transformation for the airline.
Virgin suffered significant revenue losses associated with its migration to the Sabre distribution system, earlier in August COO Sean Donohue saying “you only ever want to go through a reservations system migration once in your life”. In addition to this Virgin booked one-off charges for the roll-out of Sabre, 60 per cent acquisition of Tigerair and now wholly owned subsidiary Skywest – now Virgin Australia Regional Airlines – with the later also booking a $8.8 million operating loss. There was also a $50 million charge as a result of the carbon tax.
“Obviously the results were affected from controllable elements and some uncontrollable elements…now, of course, we are in a good position because the end result is that we are a very strong competitor in every sector of the Australian aviation market.” Virgin CEO, John Borghetti
International operations made a small $7.7 million profit, its trans-Tasman partnership with Air New Zealand and South Pacific operations continue to perform well. Velocity continues to perform strongly with growth in all areas of the frequent flyer business.
Group ASK capacity grew five per on a decline in domestic passenger numbers from 16.9 million to 16.7 million, associated with the Sabre system cutover and poor On-Time Performance. Interestingly it was highlighted that Cost per Available Seat Kilometre (CASK) has remained constant with FY12, a point of consternation with with many who assume Virgin’s cost base has grown with its maturing product.
Indicating their support of the carrier, major shareholders Air New Zealand, Singapore Airlines and Etihad have agreed to fund a AUD$90 million loan to support Virgin’s liquidity.
As moves into the second year of Game On named “Growth” Virgin will enter another Qantas pure-monopoly route in the near future, and the focus appears to be shifting to improving yield management across all areas of the business as its operation matures further.