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Virgin Australia posts $84 million loss on revenue rise

March 3, 2014 Financial, Headline News No Comments Email Email

egtmedia59Battles over capacity between Virgin Australia and Qantas have seen Virgin Australia’s fortunes slump to an AUD 84 million first-half loss, posted just a day after its larger rival Qantas declared a loss of AUD 235 million.

In the same period last year, Virgin Australia made a AUD 23 million profit. The first-half of the financial year is customarily the strongest profit period for airlines, as it includes revenue from pre-Christmas summer holiday bookings.

“The Australian aviation market continues to be impacted by the significant capacity growth which occurred during the 2013 financial year, compounded by weak economic conditions and the inability to recover the cost of the carbon tax,” Virgin Australia’s chief executive John Borghetti noted in the report.

“Consequently, the Australian domestic aviation industry has made a first-half loss for the first time in 20 years.”

Borghetti has renewed his argument against government support for Qantas.

“Do we want it to go back to the days of the 1980s, where there was a regulated market, and we all know that government supported airlines were cumbersome, they were expensive and bureaucratic, and we certainly know that airfares were higher,” he told reporters.

Borghetti told the ABC that airlines which did the best by their customers and managed their businesses effectively would prosper and “obviously, the ones that do not will fail”.

They should be allowed to fail, Borghetti contended, as plenty of investors were willing to back new carriers to replace them.

“As aviation history shows, there has never been a shortage of new airlines willing to start up and take their place.”

The airline’s pre-tax loss is about AUD 50 million. That does not include the cost of buying Tigerair Australia (AUD 18.4 million), or AUD 49.9 spent on restructuring and other expenses.

Virgin (excluding Tiger) apparently outperformed Qantas in total group revenue growth and yield. Virgin Australia’s revenue grew 5.6% to reach AUD 2.22 billion, ABC News reported.

Virgin’s costs rose 4.5% over the same period, which it attributed to fuel and foreign exchange.

Written by Peter Needham

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