Virgin Australia reports loss with frequent flyer sell off

Virgin Australia reports loss with frequent flyer sell off
By admin


In line with market expectations, Virgin Australia Holdings has announced a full-year underlying loss of $211.7 million and surprised with the sale of a 35% stake in their frequent flyer program Velocity.

While the airline increased yield by 1.2%, the operating costs increased by 3.4%, eating into the benefits of the yield increases.

Virgin Australia’s 60% stake in budget carrier Tigerair Australia suffered a $46 million loss, something that is not expected to return to profitability until financial year ending 2017.

Virgin’s capacity growth was minimal during the financial year, with the exclusion of Tigerair.

The joining of shareholders Air New Zealand, Etihad Airways and Singapore Airlines to Virgin in July raised $350 million during the financial year.

Virgin chief executive John Borghetti announced the "Virgin Vision 2017" plan for the next three years, in which the airline will focus on maximising the group's potential, by “extracting value from the business and generating sustainable profitability."

"To do this, we need to increase the growing customer loyalty to the Virgin Australia Group. That is what will assure our business of a stable future revenue stream and enable us to deliver sustainable profitability as the market recovers," Borghetti said.

The 35% stake in Velocity deal with Affinity Equity Partners is valued at $960 million, expected to increase Virgin's cash balance by $336 million and reduce its gearing by 8%.

Overall the Velocity program has 4.5 million members.

Borghetti said the deal would allow Virgin to accelerate Velocity's strategy and realise its full potential as a world-class loyalty business.

The airline also announced it will bring forward the delivery of its more fuel efficient Boeing 737 Max aircraft to 2018 from 2019 and will retire its two oldest A330 aircraft and introduce business class on all of its trans-Tasman and Pacific Island routes from early 2015.

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