REPORTING SEASON: Virgin Australia Holdings (VAH)

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Figure 1: Virgin Australia Holdings Ltd 12 month chart


Virgin Australia (VAH) sells stake in loyalty business

·         Virgin Australia (VAH) reported an underlying FY14 loss of $281.0m (incl. costs associated with losses from Tiger), roughly in-line with the market’s expectations. Once taking into account one-off costs and write-downs however VAH posted a FY14 net loss after tax of $355.6m. Restructuring costs totalled $117.3m and it made $56.9m in asset impairments (write-downs)

·         VAH blamed the result on excess market capacity (more flights added by other airlines), weaker consumer sentiment and a $51.6m cost linked to the carbon tax. Australia’s second largest listed airline also took a $46.1m loss from its 60% stake in Tiger Airways Australia. Both VAH and QAN have announced their commitments to reducing costs and improving efficiencies. VAH Chief Executive John Borghetti said “The 2014 Financial Year has seen one of the most difficult operating environments in the history of Australian aviation”

·         VAH is selling 35% of its Velocity Frequent Flyer program to fund manager Affinity Equity Partners. According to the airline this is to “…fast track its strategy to become one of the world’s leading loyalty programs”. VAH has increased its Velocity membership in recent years to 4.5m (Qantas has ~10m). Despite a $203m jump in its cash holdings, gross debt (current + non-current interest-bearing liabilities) actually rose by close to $60m or 3.2%

·         No dividend was declared. March 2008 was the last time VAH paid investors a dividend

·         Looking ahead, VAH said due to the ‘uncertain economic environment’ it would not be providing financial guidance for FY15. VAH shares rose following the result, taking the gains this week to around 3% and this calendar year to 7.2%. QAN shares have improved for the second day and are up 33% this year


You can see all of CommSec’s reporting season analysis by clicking here.

Steven Daghlian, Market Analyst,