Virgin Australia turns a profit as gas prices dip

Air NZ owns 25.9 per cent of Virgin Australia. Photo / Getty

Virgin Australia has cut after tax losses by 35 per cent, reporting a statutory loss of A$47.8 million for the six months to December 31.

Falling fuel prices, improved market share, higher yields and cost cutting had helped cut the loss from A$74.3 million in the corresponding period in the last year.

Virgin is 25.9 per cent owned by Air New Zealand and the Australian airline had turned around a pre-tax loss of $45.4 million to a $10.2 million profit.

Virgin Australia chief executive John Borghetti said the airline's results for the six months reflected a "significant" improvement in financial performance.

"This has been driven primarily by the group's continued progress in driving yield growth in the domestic market and the disciplined execution of our five-year $1 billion cost reduction programme," he said.

The improved financial performance comes as a domestic capacity battle with Qantas has eased and Borghetti said Virgin had succeeded in driving domestic yield growth.

This was despite ongoing subdued Australian consumer sentiment.

"The performance of the international business has been impacted by increased competitive pressure in key international markets. Virgin Australia Group will be implementing a series of initiatives to improve the performance of this business."

Oil price falls had yielded benefits of approximately $3 million in comparison to the first half of the 2014 financial year.

Based on its current hedging position and market rates, the Virgin expected further benefit in the second half of the 2015 financial year.

During the period Virgin had lifted its 60 per cent stake in budget carrier Tigerair Australia to 100 per cent and that airline had also cut losses.

Virgin had strengthened its balance sheet and had a cash position of $1.1 billion in the first half of the 2015 financial year, up from $783.8 million at June 30 last year.

Total group revenue increased 6 per cent to $2,377.5 million compared to the previous period.,

"While revenue growth in the leisure and international segments remained constrained, the business delivered further growth in the corporate and government, charter and interline and codeshare segments," Borghetti said.