Virgin Australia has reported a mega million dollar loss in its third quarter of the 2017 financial year, making its predictions of a return to profit look more unattainable.
Virgin this morning posted an net loss was $69 million while its underling pre-tax loss was $62.3 million, a decline of $43.7 million from last year’s $18.6 million loss for the same time period.
This shows an Underlying Loss Before Tax of $20.2 million and Statutory Loss After Tax of $90.6 million for the nine months of the 2017 financial year so far, up to March 31.
Virgin claims the poor performance in its third quarter – typically the weakest of all four quarters – was impacted by costs associated with the Group’s fleet simplification program, as well as a fluctuating exchange rates.
A sluggish domestic industry – which was blamed for Virgin Australia’s $3.6 million pre-tax loss in its first quarter – was also listed as a reason for the loss, along with the impact of the withdrawal of Tigerair from Bali, and Cyclone Debbie earlier this year.
Previously, CEO John Borghetti had claimed it was a “fair assumption” the airline would return to profitability in 2017.
During the third quarter, Virgin managed to reduce its overall debt by more than $200 million, and as of March 31 2017, the airline Group had shaved its net debt by 33 per cent compared to June 2016.
Virgin Australia has implemented initiatives under its three-year ‘Better Business’ program, keeping it on track to cease all Embraer 190 operations by the close of 2017, and finalising the sale of its six remaining owned Embraer 190 aircraft.
The Group also announced it will it will remove all six ATR 72-500 and two ATR 72-00 aircraft from its fleet, reducing the total number of ATR aircraft from 14 to six.
The impact of this fleet simplification process – a key factor blamed for its loss – will be reduced over the next 12 months, with up to $300 million in savings per year coming from the Better Business program by the end of the 2019 financial year.
Based on the current market conditions, the Virgin Australia Group has predicted its underlying performance for the fourth quarter of 2017 to improve on the results of 2016.
Meanwhile, the Australian Competition and Consumer Commission (ACCC) has given Virgin the green light to an agreement with Alliance Aviation Services, enabling them to jointly bid and contract with corporate charter customers to provide fly-in fly-out services.
ACCC Commissioner Roger Featherston said, “The ACCC considers that there are public benefits that outweigh any detriment arising from the loss of competition between Virgin Australia Regional Airlines and Alliance Airlines in providing FIFO services to corporate customers in Western Australia.”