Virgin eyes turnaround as capacity war with Qantas eases

VIRGIN Australia expects to deliver an underlying profit in the current quarter after a $355.6 million full-year loss for 2013-14.

Virgin Australia CEO John Borghetti, outgoing chairman Neil Chatfield and Virgin staff after the company’s AGM in Brisbane yesterday. Picture: Peter Wallis

VIRGIN Australia expects to deliver an underlying profit in the current quarter after a massive $355.6 million full-year loss for 2013-14 in the worst year for aviation profitability in the nation’s history.

Virgin also expects to halve the losses of its budget carrier Tigerair Australia.

Speaking at the airline’s annual general meeting yesterday, chief executive John Borghetti said there were signs the national aviation industry was “coming out the other side” having endured a “fundamental shift” in recent years, with tough competition and high fuel prices.

The domestic price war with Qantas and Jetstar was easing, helping lift the group back to profitability.

“It has been a very tough period over the past couple of years … we are coming out the other side and there are signs conditions are moderating,” Mr Borghetti said.

“I am very pleased to say Virgin Australia is in a much stronger strategic position that it was four years ago and while it is difficult to give guidance … we expect to deliver underlying profit in the second quarter of 2015.”

He said loss-making Tigerair — which Virgin bought the 40 per cent it did not already own from Singapore Airlines for a nominal $1 last month — was expected to “more than halve” the underlying loss by the second quarter next year.

Mr Borghetti said Tigerair was expected to break even at the end of the 2016 financial year, “six months earlier than previously forecast”.

James Hogan, chief executive of Ethihad Airways, which this year bolstered its stake in Virgin from 19.9 per cent to 21.24 per cent, said the Abu Dhabi-based airline was “committed to playing an active role” in supporting Virgin Australia in the future, and praised the efforts of Mr Borghetti. “Etihad Airways is a strong commercial partner (of Virgin),” Mr Hogan said.

Mr Borghetti said the full purchase of Tigerair would provide the group with substantial “synergies”.

He said Virgin had lifted its corporate client base to 25 per cent — well above the 20 per cent the group had aimed for.

Outgoing chairman Neil Chatfield said the operating environment for the Australian airline industry remained competitive and challenging.

“It is likely that we will continue to see uncertain global economic conditions and subdued consumer sentiment,” he said. “While the domestic market continues to suffer from overcapacity, there is evidence that this is easing.”

Mr Chatfield, who recently announced his intention to resign after seven years as chairman, said capacity growth was beginning to moderate and there had been an improvement in fuel costs. “We believe the business is well placed to significantly improve performance in the 2015 ­financial year.”

Qantas recently confirmed it made an underlying profit in the three months to September, and was on track to deliver an underlying profit in the first half of this financial year.