Virgin forecasts jump in profit

Virgin Australia expects a roughly 22pc rise in first-half underlying earnings, as domestic sales outweigh rising fuel costs.

Virgin CEO John Borghetti, who plans to step down from the post by 2020. Pic: James Croucher

Virgin Australia Holdings has forecast a roughly 22 per cent jump in first-half underlying earnings as strong domestic sales more than offset rising fuel costs.

Australian’s No. 2 airline (VAH) said it expects underlying profit before tax of at least $100 million for the six months through to December, 2018. That compares to a profit of $81.9 million in the same period a year ago and includes an estimated year-on-year fuel price increase of $88 million.

Virgin said strong domestic bookings helped lift its first quarter revenue by 9.7 per cent compared to the previous corresponding period, beating an earlier Virgin forecast of 7 per cent growth.

The first quarter update follows Virgin’s $653m loss for the 2018 financial year, largely due to asset writedowns designed to provide a clean balance sheet for a new CEO, with John Borghetti due to stand down by 2020.

The airline projected revenue growth of 10 per cent during the second fiscal quarter, citing current booking trends, particularly in the domestic business.

“Given the second half of the financial year is traditionally a weaker period for the aviation industry, the group will continue to monitor current trends and update the market as required,” Virgin said.

Qantas is expected to provide a first quarter update on Thursday, on the eve of the group’s annual general meeting in Brisbane.

Both airline groups have seen their share price suffer in recent months as a result of surging fuel prices.

Virgin shares were this morning trading at 20.5 cents, and Qantas at $5.59.

With Dow Jones Newswires