Air NZ faces hit from Virgin loss

Virgin lost A$49 million before tax over the past year. Photo / Getty Images

Virgin Australia has narrowed its full-year loss but will still have an impact on major shareholder Air New Zealand.

The New Zealand airline holds a 25.9 per cent stake in Virgin and it is set to bear its share - $13 million - of the A$49 million ($53.5 million) loss the Australian carrier suffered over the past year.

Virgin Australia's latest quarterly update shows that on a like-for-like basis this represented an improvement on the underlying loss before tax of A$213 million in the previous corresponding period.

The airline will release its full-year results next week, but figures out yesterday are included in the quarterly trading update.

The A$49 million loss before tax is better than the A$65 million loss analysts had expected, but well below the near A$1 billion profit rival Qantas is expected to post.

A capacity war on lucrative Australian domestic routes harmed both airlines over the past few years before they called a truce.

The Virgin group, which will release its full-year results next Friday, made an underlying loss of A$36.9 million for the June quarter, which compares with a A$46.2 million loss for the same period a year ago.

The group's Tigerair Australia subsidiary recorded an underlying loss of A$9.8 million during the quarter, an improvement on the A$25.6 million it lost during the previous corresponding period.

Chief financial officer Sankar Narayan said Virgin's performance was continuing to improve because of efforts to cut costs and lift yields by targeting the business traveller market. "The result represents a significant year-on-year improvement in performance for the seasonally weaker June quarter and we expect to see a continued positive trajectory," said Narayan who is heading across the Tasman to Xero to be CFO after four years with Virgin.

Key highlights in the result were performance on non-fuel costs, success in attracting high-yielding market segments and the improved performance of Tigerair Australia. The airline also benefited from a sharp fall in oil prices during the past year.

Air New Zealand will report its full-year result late in August. In a market update it said earnings had been strong in the second half and it expected to report normalised earnings before taxation for the year of between $520 million and $530 million, excluding the impact of its Virgin stake.