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Virgin positive despite fall in NZ profits

28 Jan 2013 SYDNEY MORNING HERALD
BY MATT O'SULLIVAN


VIRGIN AUSTRALIA insists the performance of its trans-Tasman flying operations has improved despite regulatory filings revealing its losses increased slightly last financial year.

Accounts lodged with regulators show that Virgin's New Zealand subsidiary posted a $NZ7.7 million ($6.1 million) loss for the year to June, compared with a $NZ7.4 million loss previously.

Virgin said the underlying performance of the New Zealand business - which operates most of the group's trans-Tasman flights - had improved last financial year, highlighting a reduction in pre-tax losses despite effects of the Christchurch earthquake still weighing on demand.

The full-year result reflected new commercial arrangements put in place in March when it restructured its entire international operations, the airline said.

The rejig resulted in all the company's planes and staff being housed under the listed Virgin Australia Holdings, which charges full commercial rates to subsidiaries for services.

Qantas's New Zealand subsidiary, Jetconnect, reported a $NZ10.6 million profit for the year to June, compared with a $NZ11.3 million profit a year earlier.

Qantas said the result did not represent the true health of the subsidiary, which crews and operates Qantas-branded aircraft on trans-Tasman flights on behalf of the parent.

"It does not sell tickets or carry out any other commercial functions on behalf of Qantas, so its financial results do not reflect the overall performance of Qantas's trans-Tasman services," a spokesman said.

"Jetconnect's accounts reflect the costs it charges back to the Qantas Group plus an operating margin."

Qantas would not reveal Jetconnect's financial performance.

However, it did tell a Fair Work hearing in June that the subsidiary was "incurring losses because of the fundamental dynamics of the market and, even though it has a cost structure that's comparable to Air New Zealand ... it's still losing money".

Jetconnect was at the centre of an industrial relations battle between Qantas and its long-haul pilots' union. Earlier this month Fair Work rejected the union's attempt to have Jetconnect pilots covered by the existing industrial agreement between the long-haul pilots and the company.

Neither Virgin nor Qantas break out the performance of their New Zealand subsidiaries when they report their group results every six months. A lower wages bill is the main benefit for the airlines of basing their trans-Tasman flying operations in New Zealand.

After ditching domestic services in 2010, Virgin's New Zealand subsidiary has focused on the trans-Tasman route, which is dominated by the Air New Zealand-Virgin alliance and Qantas and its offshoot, Jetstar.

Qantas's proposed alliance partner, Emirates, also has a large presence.

Virgin's New Zealand subsidiary employs about 540 staff - mostly pilots, flight attendants, administration and salespeople - and operates 10 Boeing 737 aircraft.

Jetconnect flies 90 per cent of the Qantas-branded services between Australia and New Zealand, employing just over 600 staff and operating a fleet of eight Boeing 737-800 aircraft.

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