Virgin Australia to reduce capacity by 5%

Edited by Nelly Tawil

The March quarter brought an $18.6 million underlying loss before tax for Virgin Australia who said it remained on track to post a profit for the full year.

However Virgin now expects to report a total underlying profit before tax of $30 million to $60 million this financial year, after reporting an underlying profit before tax of $81.5 million in the first half. That would not meet its prior target of reporting a return on invested capital in line with its cost of capital this financial year.

However their was a 16.2% soft number improvement on the corresponding figure last year.

“While the group improved its underlying performance in this quarter, it was against a challenging operating environment,” Virgin boss John Borghetti said.

“This environment has been impacted by weak consumer demand and sentiment, uncertainty around the federal election and the resources sector downturn.”

Due to restructuring charges, counting the removal of surplus ATR72 turboprop capacity due to the resources downturn, Virgin informed its statutory loss more than doubled to %58.8 million from $28.3 million in the year-earlier period.

“The fleet restructure charges…along with further initiatives to come, will provide us with significant cost savings going forward,” Mr Borghetti said.

Virgin is expected to reduce its capacity by 5.1% in the fourth quarter, with reductions largely focused on regional routes as the mining downturn weighs on demand.

The effort shadows a cut in Qantas’ domestic capacity guidance two weeks ago, which developed in the national carrier’s shares suffering their worst week in over four years.

Virgin has maintained its forecast for a full-year profit despite the headwinds; with expectations underlying earnings will fall in the range in the range of $30 million to $60 million.

Virgin had opted not to specify an expected profit number at its half-year results, only going as far as to tip a profit.

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