Virgin posts strong second quarter profit

Virgin Australia is cruising through the clear, blue skies of profit.

The airline’s underlying profit before tax in the three months to December 31 rose 32.2 per cent to $73 million which equates to a statutory profit of $60.8 million, up by $49.6 million on the same period a year ago.

This follows a strong first quarter which saw Australia’s second largest carrier back in the black.

Virgin Australia chief executive John Borghetti said strong revenue growth from domestic travellers during the second quarter and ongoing improvement in Tigerair Australia helped boost the airline’s profit.

“Our performance in the second quarter was underpinned by strong unit revenue and yield growth across the Group, particularly in Virgin Australia Domestic, ongoing improvement in Tigerair Australia, strong momentum for Velocity and our continued strict cost discipline,” he said.

He said the airline’s international business also continued to improve, despite the financial impact of volcanic eruptions in Bali.

Virgin Australia’s revenue from domestic passengers rose 3.5 per cent during the second quarter.

Tigerair’s revenue bounced 9.1 per cent, while the airline’s international operation saw a 2.6 per cent rise.

The positive result has failed to impress investors with the share price falling one per cent, while the wider market rose by two per cent on Thursday afternoon.

CMC Markets chief market strategist Michael McCarthy said the figures indicate cost savings from oil price declines were behind the better result and not increased passenger numbers or higher fares.

“The (profit) percentage increase looks good but it was in line with expectations,” he said.

“Revenue has fallen but costs have fallen further and that is driving the increase in profitability but it does suggest that the increase in activity is due to a lower price point.”

optionsXpress market analyst Ben Le Brun said a bounce in oil prices overnight, which pushes up the costs of business for airlines, were also weighing on Virgin and Qantas share price on Thursday.

“The oil price movement overnight has not helped the airlines,” he said.

Virgin Australia’s first half results are due on February 11.

Shares in Virgin Australia retraced earlier losses to close steady at 49.00 cents, while Qantas dropped four cents to $3.86.

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