Aviation, tourism and energy writer for the Business Herald

Virgin Australia profit soar as oil falls

More corporate and government travel has helped boost profits at Virgin Australia. Photo / Mark Mitchell
More corporate and government travel has helped boost profits at Virgin Australia. Photo / Mark Mitchell

Virgin Australia has reported an underlying profit of A$81.5 million for the first half of the financial year, helped by falling oil prices.

The before tax result was an improvement of $71.3 million on the first half of the 2015 financial year.

The airline - 26 per cent owned by Air New Zealand - said it was benefiting from the fall in oil prices, which are now at 12 year lows.

"The group's net benefit from changes in the price of oil, taking into account the adverse impact of foreign exchange rates, was $33.8 million. Based on its current hedging position and market rates, the group expects to see a further net benefit in the second half of this financial year," said group chief executive John Borghetti.

The group had strengthened the fundamentals of each of the businesses through the half and is in a better position for sustainable growth.

Its domestic operation delivered very strong revenue per available seat kilometre (RASK) growth.

Yield growth was also significant, the result of attracting more corporate and government travelers during the half, Borghetti said.Virgin Australia International RASK growth continued, despite a $19.2 million impact due to volcanic activity in Bali.

"This business remains on track to deliver a profit by the end of the 2017 financial year."
Borghetti said its low cost carrier, Tigerair Australia, continued its turnaround with underlying earnings before interest and tax ( EBIT) of $13.9 million, an improvement of $38.7 million on a standalone basis compared with the prior corresponding period.

Its frequent flyer Velocity scheme delivered revenue of $154.8 million, representing an improvement of 26.3 per cent on the first half of the 2015 financial year and its membership base grew by 21.7 per cent to 5.7 million.

The group incurred $59.4 million of restructuring and transaction costs and impairment losses on assets held for sale in the half as part of the broader fleet simplification initiative.

Borghetti said the airline's operational and financial performance continues to show strong momentum across all business units.

"The group is improving its revenue and customer offering in all segments of the aviation market. At the same time, the group is maintaining strict cost discipline while optimising the balance sheet."

Like other airlines, Virgin Australia couldn't give detailed guidance for the full year.While it was on track to "deliver a return on invested capital in line with its cost of capital" due to current market conditions it was not able to provide specific guidance at this time, Borghetti said.

The airline is expanding operations in New Zealand with Christchurch-Rarotonga services starting this winter.

- NZ Herald

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