KEY POINTS:
Pacific Blue is on target to break even by its first New Zealand birthday in spite of high fuel costs, its battered Australian parent company says.
Virgin Blue yesterday posted a 55 per cent fall in full-year net profit on record fuel costs and warned this financial year
would be challenging.
Virgin's profit dropped to A$97.7 million for the year ended June 30 prompting its stock to fall as much as 28 per cent at one point.
The airline said key drivers of the business, capacity demand and costs of fuel remained highly volatile.
There have been reports Pacific Blue had made a significant loss up to $30 million since entering the New Zealand domestic market last November. Virgin Blue chief executive Brett Godfrey said performance was in line with budget, the airline was "very pleased" with progress and by the 12 month mark would break even.
In spite of continuing high fuel prices and falling discretionary spending in the leisure sector, Pacific Blue remains on the expansion trail.
In the past month it has announced new services from Auckland to Sydney and Melbourne in the highly competitive transtasman sector.
In December, its international offshoot, V Australia, begins 10 return flights a week on the trans-Pacific route.
Loss sends Virgin Blue into tailspin
Virgin Blue has joined Cathay Pacific and Thai Airways in posting losses after the price of jet fuel more than doubled in the year ended June. The Brisbane-based carrier will scrap its second-half dividend to offset its growing fuel bill.
Virgin Blue fell A32.5c cent to A84c yesterday. The airline had more than doubled in Sydney trading in the month since July, when owner Toll said that it would distribute a 62 per cent stake in the carrier to shareholders. The jump was spurred by falling oil prices and speculation about a possible takeover.
"The stock is getting hammered," said funds manager Matthew Kidman, of Wilson Asset Management.
"The operating environment during the next 12 months is expected to be the most challenging the Virgin Blue Group has experienced to date," the airline said.
Virgin Blue planned to cut A$50 million in costs, raise domestic fares and scale back growth plans.
It also froze management pay and drew up plans to redeploy planes from money-losing routes.
- Additional reporting by Bloomberg