Virgin swings to first-half loss

Airline follows suit with Qantas in declining FY guidance, revenue lifts 6%.

Virgin Australia Holdings has followed suit with rival Qantas Airways in declining to provide guidance for the rest of the year, as it too swung to a first-half loss.

In the six months to December 31, the airline posted a net loss attributable to members of $83.7 million, a 463.9% decline on the $23m profit recorded in the previous corresponding period.

The airline said its first-half performance was impacted by achallenging trading and competitive environment; ongoing subdued consumer sentiment and economic uncertainty; the effect of strong market capacity growth, as well as the unrecovered $27m cost of the carbon tax.

In the same period revenue was $2.242 billion, a 6.4% increase on the $2.106bn recorded in the first half of 2012.

Earlier this month, Virgin had flagged a loss before tax in line with the analysts' median forecast of $49 million.

It delivered just that with a pre-tax loss of $49.7m. The figure excludes the impact of Tiger Airways Australia, as well as business transformation and other expenses.

At the end of the half, Virgin's total cash position was $896.4m, while its unrestricted cash position was $665.4m. Both are improvements on the respective $315.9m and $338.9m recorded at the end of the previous corresponding period.

Virgin said its business efficiency program continues to progress towards the target of $400 million in cumulative productivity gains for fiscal 2015, but also noted it has found additional cost saving initiatives, over and above this program, that will be implemented over the next three years.

The group declined to pay a dividend.

Virgin's results come a day after rival Qantas swung to a first half statutory loss of $235 million and announced plans to axe 5,000 jobs as part of a bid to cut $2 billion in costs over three years.

Uncertain environment prohibits guidance: Borghetti

Virgin chief executive officer John Borghetti said the airline's focus for the first half had been consolidating its position as an effective competitor in all key market segments.

In achieving this, he said several major strategic initiatives had been executed, including the restructure of its the balance sheet and the completion of strategic investments.

"Given the infancy of these initiatives and the tough operating and trading environment, we are yet to see their full impact," he said.

In the 18 months ahead, Mr Borghetti said Virgin will focus on optimising the business for consistent and sustainable performance.

"This will be achieved through accelerating efficiency and productivity initiatives, both internally and through leveraging the scale of our alliance partners, fast-tracking penetration into higher-yielding market segments in order to grow yield, continuing to lead the Australian industry in customer experience and creating value through our customer loyalty program."

Mr Borghetti said given the uncertain economic environment, the group was unable to provide guidance for the remainder of the 2014 financial year.

However he said Virgin had increased its proportion of domestic revenue from the corporate and government market.

It had also outperformed Qantas on the key measures of growth in total group revenue, domestic yield, international Yield and group revenue load factor.

Virgin said it was beginning to see positive results from its acquisition of the Skywest business in April 2013.

"Consistent with expectations, Skywest remains on track to be earnings accretive from financial year 2015.

Virgin said following strong growth in the first half Velocity Frequent Flyer membership now exceeded 4 million.

“We continue to see growth across all key metrics and we are confident of achieving our target of 5 million members by the end of the 2015 financial year," Mr Borghetti said.

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