REPORTING SEASON: Virgin Australia (VAH)
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Figure 1: Virgin Australia 12 month chart
Virgin Australia Holdings (VAH) expects to return to profitability in FY16
– Virgin Australia (VAH) posted a $93.8m loss for the 12 months ended June 30. The result was a $261.8m improvement on 2014 and in-line with consensus. VAH flagged the result a week earlier.
– The result was held back most by its underperforming International business, which posted a $69m loss over the year; $23m worse than FY14. Its Domestic unit improved earnings by $226m, generating $218m in profit. Low-cost carrier, Tigerair Australia has lost $8.6m from the date of its full acquisition by VAH on 17 October 2014. Its Velocity Frequent Flyer loyalty business increased earnings by $81.2m; adding 900,000 customers over the year.
– The airline announced an overhaul to its international operations, ceasing some services from Perth, Melbourne, Adelaide and Bali. Tigerair is expected to pick up these routes. This decision is due to weak demand for premium air travel. Supplementary Trans-Tasman routes will be added.
– VAH hasn’t been profitable since 2012, but is eying a return to profitability in FY16. Tigerair is expecting full profitability this year and its International unit by next year. The market estimates profit of more than $100m for its next annual result. With Australia’s second largest airline still not in the black, no dividend was declared. February 2008 was the last time VAH shared its profits.
– VAH shares were unchanged following the result. Its 11% improvement over the past year is a substantial underperformance compared to Qantas (QAN). QAN shares have tripled in 12 months.