Diversification is key, says Virgin

Diversification is key, says Virgin
By admin


Virgin Australia is confident its profits will climb in the face of prevailing economic challenges, as it continues to diversify its product offering.

Speaking at the airline’s annual general meeting in Brisbane, chief executive John Borghetti confirmed the airline will pursue domestic capacity growth of between 8% and 9% in the first half of the 2013 financial year, but declined to provide shareholders with profit guidance due to a “particularly competitive environment”.

But he predicted “improved profit before tax” was on the cards, pointing to recent transactions which he identified as key to the airline’s strategy to overcome economic challenges.

Virgin’s acquisition of regional carrier Skywest and a 60% stake in Tiger Australia, combined with Singapore Airline’s acquisition of  a 10% stake in the airline, will “bring important benefits to Australia” in the form of jobs, tourism and competition, Borghetti predicted.

“We need to ensure that Australia has strong competition in all sectors of the aviation market and these transactions will allow that,” he said.

Meanwhile, chairman Neil Chatfield reported success for the airline’s focus on diversifying its earnings through its Game Change strategy, now moving into its next phase.

He confirmed Virgin had exceeded its target of 20% of domestic revenue from the corporate and government market, achieving a “strong presence” in both the leisure and business travel markets.

“The progress achieved so far has seen us much better equipped to weather the volatile operating environment and this is evident in our results,” he told shareholders. “We plan to continue this work through expanding our presence in the budget and regional markets.”

While he conceded strong competition in the domestic market looks set to continue, he insisted Virgin is “well-placed to manage” and said the airline would seek to capitalise on growth potential in the Asian and Middle Eastern markets.

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