Domestic battle takes toll on Virgin

Domestic battle takes toll on Virgin
By admin


Virgin Australia today joined Qantas in suffering from Australia's fierce domestic capacity battle as it reported a slump in first half profits.

Revenue growth of 5% was achieved despite the biggest hike in capacity for nine years, chief executive John Borghetti said.

But it dented the bottom line as the market share battle, and subsequent decline in airfares and yield, saw net profit after tax fall from $52 million to $23m in the six months to December 31. Underlying pre-tax profit hit $61m.

Shares fell 4.6% to $0.415 this afternoon.

The airline also blamed the result on a $24.4m carbon tax cost and the absence of any Qantas industrial action which provided a $6m earnings boost in the previous corresponding period.

Virgin also signalled that the domestic battle is set to continue with the carrier set to grow capacity by 5% to 7% in the second half of the financial year.

From May 15 it will operate A330 aircraft on two out of three weekday services between Brisbane and Perth, while new services between Brisbane and Moranbah and Brisbane and Bundaberg will be launched.

Despite the profit decline, Borghetti described the result as "solid". He highlighted the 56% growth of interline and codeshare revenue, the successful introduction of the Sabre system and continued progress of the Game Change Strategy as reasons for optimism and further growth.

"Considering the aggressive competition and challenging economic environment, Virgin Australia has delivered a solid result…illustrating the success and resilience of our new operating model," he said.

"The Game Change Strategy has driven improved revenue performance, with revenue growth of 5.4% on the first half of financial year 2012, building on the strong growth of 18% that we achieved on the first half of 2011.

"This revenue growth was also achieved in the context of the highest domestic market capacity increase since the launch of Jetstar in 2004."

Virgin gave no financial guidance for the full year due to the economic uncertainty and competitive environment.

But Borghetti said Virgin outperformed the market with group yield down 1%, a fall which "reflected the aggressive capacity and pricing environment".

He declared that its global alliance strategy goes from "strength to strength" with the partnership also having a positive impact on the Velocity Frequent Flyer program. Membership, now at 3.5 million, increased 15.5% in the first half.

The carrier said it has also grown its corporate and government revenue and "maintained the new norm in which more than 20% of our domestic revenues comes from this higher yielding market".

Latest News

  • Tour Operators
  • Travel Weekly TV

What sets Eclipse Travel apart with Africa expert Hilary Dubyk: Travel Weekly TV

Join Hilary and Nancy on the couch in the weeks episode and learn a little more about why Hilary loves ‘the Mother Continent’ so much and why she thinks the expedition cruise space is one of the most exciting to watch in 2024. Hilary is an absolute Africa specialist who has found a home in […]

  • Destinations
  • Tourism

Surge in Australians visiting Japan

The number of Australians visiting Japan in the first quarter of 2024 increased by 46.3% compared to the same period in 2019, new data released by Japan National Tourism Organization (JNTO) shows. Visitor numbers in March alone were up a staggering 87.4% compared to March 2019. “These figures are fantastic to see and confirm what […]

  • Cruise
  • Luxury
  • News

Seabourn announces Western Kimberley Traditional Owners as Godparents of Seabourn Pursuit

Seabourn has named Western Kimberley Traditional Owners, the Wunambal Gaambera, as Godparents of the ultra-luxury purpose-built Seabourn Pursuit. It is the first cruise line to appoint Traditional Owners as godparents of a ship. Seabourn Pursuit embarks on its inaugural season in the Kimberley region this June. The naming ceremony will take place on Seabourn Pursuit’s […]

  • Luxury

Malolo Island Resort opens brand new Spa

Fiji’s Malolo Island has added another string to its bow – opening its $1.3 million day spa on Thursday, 18th April 2024. (Lead Image: matriarch Rosie Whitton with spa staff) Located at the edge of the resort’s luscious patch of tropical rainforest, the new “Leilani’s Spa” adds another level of elevated experiences to Malolo’s already […]