Virgin Australia will cut back capacity in the June quarter (the final quarter of this financial year) by 5.1% due to soft demand combined with uncertainty about the Australian Federal election, which is set to be held on 2 July 2016.The move comes two weeks after Qantas reduced domestic capacity, also mentioning a fall in demand in the run-up to the election. See: Looming election softens market for Qantas
Virgin’s major shareholder, Air New Zealand, said recently it may sell its 25.9% stake and Virgin said earlier this year it plans to raise a loan of AUD 425 million from its four largest shareholders.
Virgin has revised its guidance for the full year to 30 June 2016, saying it expects to make an underlying profit before tax of between AUD 30 and 60 million, an improvement of between AUD 79 and 109 million on financial year 2015.
Writing in his Plane Talking blog on Crikey.com.au, veteran aviation reporter Ben Sandilands considered that Virgin’s “abrupt capacity cull” would substantially benefit Qantas domestic.
Sandilands also mentioned that it is almost six years since Virgin Australia transitioned from Virgin Blue towards what it saw as a “radiant future built on taking away a substantial part of the Qantas juggernaut’s lucrative managed business travel accounts”. Yet there was still “no sign that Virgin Australia will ever deliver the vision in the manner that stakeholders need”.
It might be time, Sandilands suggested, for Virgin Australia to consider emulating Virgin America and find a buyer for the entire business or key components.
Written by Peter Needham