Virgin Australia has reported its sixth consecutive full-year loss of $681 million after impairments and tax adjustments, but the airline is optimistic about delivering a statutory profit in the next half.
The company’s statutory profit for the year to June 30 was impacted by a $120 million impairment of its international business assets and deferred tax accounting write-offs for $451.9 million. It follows a $185 million loss a year ago.
Full-year revenue, however, was up 7.4 per cent to $5.42 billion and the airline swung to an underlying profit before tax of $109.6 million, boosted by record earnings in its domestic business.
Domestic underlying earnings business recorded its highest earnings since reporting on the segment began in 2011/12 at $516 million – up 49.5 per cent on the previous year.
Virgin Australia chief executive John Borghetti said the airline’s investment in onboard Wi-Fi, a new mobile app and better airport check-in facilities were paying off.
“The domestic business is in the best position it has ever been in – we have attracted an increasing share of passengers, grown revenue and now created a more efficient fleet and domestic network,” Mr Borghetti said in a call to media on Wednesday.
“There’s no doubt our performance so far is pleasing in its own right, but importantly, it shows that we will keep building a sustainable and profitable business in the domestic market going forward.”
Virgin’s international business, however, suffered a 51 per cent loss in earnings to $19 million, impacted by higher fuel prices, Bali’s volcanic activity in late 2017 and its investment in Hong Kong services.
The airline anticipates its new Melbourne – Hong Kong and Sydney – Hong Kong routes will capture the growing number of Chinese tourists visiting the country.
Meanwhile, budget airline Tigerair reported an earnings loss of $7.6 million, an improvement on the previous year’s result of a $9.9 million loss, and a 3.4 per cent increase in passengers.
The company’s outlook is largely positive, with revenue expected to increase by at least 7 per cent in the first quarter of the 2018/19 financial year, following a bumper July.
“In July 2018, the group recorded its highest-ever July revenue outcome and there is further positive momentum in forward bookings,” Mr Borghetti said.
The airline also expects to deliver an underlying and statutory profit in the first half of the financial year, notwithstanding an expected fuel price increase (net of hedging and foreign exchange) of $85 million.
Virgin Australia’s total fuel cost is expected to be about $1.2 billion in 2018/19, but the company expects to keep airfares competitive.
At 1135 AEST, Virgin Australia’s shares were down 1 cent, or 4 per cent to 24 cents.
VIRGIN AUSTRALIA FY18 PROFIT DOWN:
* Net loss of $681m, compared to $220.3m loss in prior year
* Underlying pre-tax profit of $109.6m, up from prior year’s $3.7m loss
* Revenue up 7.4pct to $5.42b
* No final dividend, unchanged