Virgin Australia announces $83.7 million after-tax loss, a day after Qantas announces $252 million deficit

UPDATE: Fresh from posting an $83m loss, Virgin Australia’s boss has attacked Qantas and called for the scrapping of the carbon tax and government handouts.

VIRGIN Australia boss John Borghetti says the best thing the government and Labor could do for airlines is to scrap the carbon tax and end the “age of entitlements” for business.

Virgin Australia today reported an $83.7 million after-tax loss for the half-year to December 31, as it fights to take market share from rival Qantas.

ALAN JOYCE: STRIKE ACTION WON’T HELP QANTAS

This is down from a $23 million profit for the airline in the corresponding period in 2012.

Their $49.7 million pre-tax loss was in line with expectations.

Mr Borghetti said he had no problem with the government repealing the Qantas Sale Act, to allow the rival airline to take on majority foreign ownership.

“(But) the best assistance the government and the Opposition can provide is the removal of the carbon tax, which has cost this industry hundreds of millions of dollars,” he said.

“To that end, I just say we applaud the government’s position on this.”

Virgin claims the carbon tax has cost the airline $27 million.

Labor and the Greens are blocking the carbon tax repeal legislation in the Senate, but the government is hopeful the new Senate — which starts on July 1 — will help it pass the bills.

News_Image_File: High flyers ... Richard Branson and Virgin Australia chief executive John Borghetti.

Mr Borghetti said he opposes the government providing a debt guarantee to Qantas.

“We have earned our right to exist,” he said.

“If Australia is to prosper in the age of globalisation, then the age of entitlements needs to go.

“Nobody is entitled to a certain percentage of the market — you need to work hard to get that.” Mr Borghetti said Virgin has contributed $11 billion to the Australian economy, bolstered the tourism industry through co-operation with state and federal tourism bodies, brought prices down while improving service delivery, and created jobs.

“Why would any government or Opposition consider setting us back?” he said.

Virgin Australia shares fell 1.43 per cent following the announcement of the airline’s $83.7 million loss, to 34.5c in late morning trade.

Fresh from Qantas’ $252 million loss announced yesterday, Virgin Australia’s dire result proves that the foreign airline-backed carrier is fighting a losing battle on the domestic market.

The loss includes a $18 million loss from its two-third ownership of Tiger Airways.

While Qantas has also taken a hit in the process, it’s domestic arm and domestic Jetstar brand remain profitable.

News_Image_File: Domestic market ... Virgin continued to increase its proportion of domestic revenue from the lucrative corporate and government market segments.

Despite the heavy loss, Mr Borghetti said the group remained on track to deliver its targets, although he declined to offer up an outlook.

“The result reflects the tough trading conditions across the entire industry for the first half of financial year 2014,” he said.

“However Virgin Australia continued to increase its proportion of domestic revenue from the corporate and government market segment and outperformed its main competitor on the key measures of growth in total group revenue, domestic yield, international yield and group revenue load factor.”

Hitting back at Qantas allegations that Virgin Australia was responsible for the capacity war that has flooded the domestic aviation market with millions of extra seats, Mr Borghetti said that over the past three years Qantas has added an additional 7.1 million seats on Australian domestic routes and Virgin Australia has added 2.8 million seats.

Mr Borghetti said Virgin would no longer provide updates on how much capacity it intends to add to the market, because it just provided Qantas an opportunity to swamp the market with additional seats — adding two planes for every one that his airline adds.

He said much of Virgin’s new capacity was on regional and new routes, improving the airline’s services. He said Qantas, by contrast, was swamping existing routes with new capacity.

News_Rich_Media: Qantas CEO Alan Joyce announces 5000 jobs will be cut, after a $252 million half-year loss.

Mr Borghetti suggested that Qantas was also playing around with statistics when it talks about the importance of maintaining its 65 per cent domestic market share.

He said it had already fallen below this figure in the premium market, with Virgin Australia now capturing 42 per cent of business and government travellers.

Responding to Qantas allegations that Virgin Australia is unfairly bankrolled by foreign governments through large investments by Singapore Airlines, Etihad and Air New Zealand, Mr Borghetti said that these airlines had the opportunity to invest in Qantas but had decided that Virgin was a better bet.

He said Virgin Australia is now competitive in both domestic and international markets and has increased jobs and fleet.

But it’s been very difficult to make these gains

“We have had to earn every gain we have made against a dominant player,’’ Mr Borghetti said.

“We have earned our right to exist and that’s what free enterprise is all about.”

Virgin’s profit loss was publicly disclosed just a day after the Flying Kangaroo said it would slash 5000 jobs, cuts routes and sell or defer the arrival of 50 aircraft as it outlined its own $252 million deficit.

News_Rich_Media: Qantas chief executive Alan Joyce says he's the right man to oversee the airlines return to profit.

In announcing the biggest overhaul of the company in its history, Qantas chief executive Alan Joyce once again blamed a distorted domestic aviation market, pointing the finger squarely at Virgin Australia and its major shareholders Etihad, Singapore Airlines and Air New Zealand.

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“The Australian domestic market has been distorted by current Australian aviation policy, which allows Virgin Australia to be majority-owned by three foreign government-backed airlines yet retain access to Australian bilateral flying rights,” he said.

“Late last year, these three foreign-airline shareholders invested more than $300 million in Virgin Australia ... that capital injection has supported continued domestic capacity growth by Virgin Australia despite its growing losses.”

News_Image_File: No holding back ... Sir Richard Branson declared in January that Qantas chief executive Alan Joyce was in “deep s — t”.

Virgin founder Sir Richard Branson, who still owns 10 per cent of Virgin Australia, has also come out swinging at the Flying Kangaroo in recent months.

He declared in January that Mr Joyce was in “deep s — t” and recently ran a full-page advertisement run in News Corp Australia papers in which he made clear his opposition to any assistance package.

“Should the Australian taxpayer be forced by the Australian Government to prop up the Qantas Group, as Federal Treasurer Joe Hockey is suggesting, business people worldwide should think twice about investing in Australia for fear of such intervention in their sectors,” he said.

“Qantas has gone to its shareholders on numerous occasions over the last few years to wage its capacity war against us.

“Now that shareholders have turned that tap off, the company is turning to the Australian taxpayer to try and bail it out.”

- with AAP

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