Virgin Australia records third-quarter loss

Aviation giant says its soft result was impacted by weak consumer demand and uncertainty about the election.

Virgin Australia CEO John Borghetti. (Picture: Hollie Adams/The Australian)

Investors are punishing Virgin Australia for cutting capacity and forecasting a loss in the second half of the financial year.

Shares in the airline tumbled 4.3 per cent to 33.5 cents at 2.20pm (AEST), against a 0.39 per cent dip in the broader market.

The firm’s stock has slumped more than 24 per cent since the start of this year while the benchmark S&P/ASX 200 has shed 1.6 per cent.

It comes as Virgin Australia recorded an $18.6 million underlying loss in the third quarter, but said it remained on track to post a profit for the full year.

The local aviation giant swung to the red as demand softened, with the development following an $81.5m underlying profit in the first half.

The soft number was, however, a 16.2 per cent 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.”

The firm said it recorded an after-tax loss of $58.8m, with fleet restructuring initiatives at the heart of the soft performance.

The lacklustre environment will see Virgin slash capacity 5.1 per cent in the fourth quarter, with the reductions largely focussed on regional routes as the mining downturn weighs on demand.

The move follows a cut in Qantas’ domestic capacity guidance two weeks ago, which resulted in the national carrier’s shares enduring 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.