Virgin Australia swings to profit

Virgin Australia has swung to a profit, thanks to a lower fuel bill and increases to its domestic airfares.

Australia’s second biggest airline behind Qantas has reported a net profit of $45.7 million for the half year to December 31, its best result in six years.

The result was a major turnaround from $53.1 million net loss Virgin suffered a year earlier.

Chief executive John Borghetti says the airline saved $33.8 million as a result of falling oil prices.

With oil prices hovering around 12 year-lows, Virgin expects further gains in the second half of fiscal 2016.

Mr Borghetti expects Virgin to book a profit for 2015/16 but stopped short of providing specific guidance due to current market conditions.

He said the airline’s operational and financial performance continues to show strong momentum across all its businesses.

“The group is improving its revenue and customer offering in all segments of the aviation market. At the same time, the group is maintaining strict cost discipline while optimising the balance sheet,” he said in a statement on Thursday.

Virgin also remains on track to exceed its target of $1.2 billion cumulative cost savings by the end of the 2017 financial year.

Cost per available seat kilometre fell by 1.5 per cent in the first half of fiscal 2016 from a year earlier.

During the first half, Virgin delivered cost efficiencies, including returning the line maintenance of the ATR aircraft in-house and signing a long-term engine maintenance agreement with Delta Air Lines, Mr Borghetti said.

The Brisbane-based carrier will also make further cost savings from the sale of five Embraer 190s and six of its Embraer 170s, which are currently sub-leased to Delta Air Lines, Mr Borghetti said.

Virgin’s underlying profit before tax jumped sharply to $81.5 million for first half from $10.2 million a year ago, driven by strong revenue from its domestic operations and ongoing improvements at its budget carrier, Tigerair Australia.

Revenue rose 11.8 per cent to $2.66 billion, with Tigerair increasing its contribution to $243.8 million from $75.5 million a year ago.

Shares in Virgin Australia were half a cent lower at 48.5 cents at 1024 AEDT.

VIRGIN BACK IN THE BLACK

* Net profit $45.7m vs $53.1m loss

* Revenue up 11.8pct to $2.7bn

* No interim dividend

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