Virgin flags turbulence as Tigerair posts first full-year profit

Virgin’s John Borghetti has spruiked the group’s positive momentum as Tigerair landed a profit ahead of schedule.

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Virgin Australia has warned it won’t be able to provide guidance for the full-year as volatile conditions continue, while declaring subsidiary Tigerair Australia’s first ever full-year profit in FY2016, one year ahead of schedule.

The disclosures came as the airline officially released its full-year numbers, one week after outlining core earnings numbers in a report on the fourth quarter.

Virgin (VAH) reaffirmed underlying profit before tax of $41 million for the year to June 30 — which had come in at the lower-half of guidance for $30m-$60m — and a statutory loss of $224.7m after tax due to pre-tax restructuring costs of $440.5m.

In a more detailed analysis of the year, the group added its revenue had jumped 5.7 per cent to $5.02 billion, while underlying pre-tax earnings growth was driven by a 45.8 per cent lift at its flagship domestic arm.

The domestic operations had enjoyed a stellar first-half, although more challenging conditions prevailed in the second-half — which it linked to Federal Election uncertainty and the resources sector downturn.

“These results were delivered in a challenging operating environment affected by subdued consumer demand, the downturn of the resources sector and uncertainty around the economy and political events.” Virgin Australia boss John Borghetti said.

“Strategic capacity reductions were made in line with reduced demand, particularly on regional routes.”

Its struggling international operations saw a 30 per cent improvement, but remain a year away from profitability, while discount airline Tigerair Australia recorded its first profit.

The company had previously tipped a first profit for Tigerair in FY2017, with the $2.2m earnings before tax a positive surprise.

“During the 2016 financial year, Tigerair Australia consolidated its position in the low-cost travel market,” Mr Borghetti said.

“Tigerair Australia’s total revenue passengers increased by 11.6 per cent on the prior year, while revenue passenger kilometre growth was in line with capacity growth.”

Virgin claimed a 60 per cent stake in Tigerair in 2012, before taking full control in 2014 as it looked to challenge Qantas offshoot Jetstar.

Mr Borghetti indicated the group’s performance through the first month of fiscal 2017 was robust, but he opted against offering specific guidance for the year as a clear demand pattern is yet to emerge.

“Based on current business performance, the group’s positive momentum is expected to continue. However, due to market uncertainty, we are unable to provide further detail at this time,” he said.