Virgin Australia delivers strong result, but there's no sitting still

Virgin Australia’s management has delivered a solid result for the first half of the financial year, with an underlying net profit before tax of A$96.1 million, up 34 per cent on the same period last year.

Celebrating the overall strong performance of the VA Group, CEO John Borghetti (pictured) said that the result demonstrated “that our strategy to reposition the business is having a material impact on the company’s financial position ahead of schedule”.

Borghetti also announced a restructuring of the business to facilitate offshore investment in the domestic business and improve liquidity.

Highlights of the results presentation included:

• Revenues were up 18 per cent to $2 billion.
• Yield growth in the domestic business was up 13.7 per cent.
• Liquidity is based on unrestricted cash of $506 million.
• The international division turned in an EBIT of $35 million, up 39 per cent.
• There was a 121 per cent increase in high-yield fares.
• Corporate/government revenues are up 81 per cent, now representing around 17 per cent of total revenues.
• The airline retained all of its corporate/government accounts and added another 35.
• The new ATR regional operations (four aircraft to date) have generated better than expected loads and yields.
• Interline and codeshare traffic is up over 100 per cent on the previous period.
• 1800 cabin crew have been through a development program designed to enhance service levels.
• A new wide-body maintenance hangar will be in operation on Sydney Airport by mid 2014.
• By the end of June this year the airline will have selected its first cadets for a new pilot training program.
• The Embraer 190s are getting business class to enhance product offering on key routes such as Canberra-Sydney.
• From April, business-class product on both the B737 and EMB190 will include tablets loaded with infotainment.
• VA is following Qantas into wi-fi delivery to passengers’ own devices - on the B737s before the end of this year
• New lounges will be built at Darwin and the Gold Coast; while lounges at Sydney, Adelaide and Perth are to be upgraded.
• The B777 long-haul aircraft are getting a refurbishment before the end of FY 2012.
• Frequent flyer program membership is approaching three million, up from 2.5 million only six months prior.
• No interim dividend declared, to support liquidity.

In terms of outlook, John Borghetti said that, “We expect an improvement in underlying performance for the full year in comparison with Financial Year 2011… However we are unable to provide specific guidance at this stage, due to the uncertain economic environment.”

It’s a strong result, with no real surprises for industry insiders.

It’s hard to find anywhere that Borghetti has put a foot wrong since taking command of the business almost two years ago. He doesn’t, of course, have the industrial relations baggage that has plagued rival Alan Joyce across at Qantas. Not (yet) having any icon status to defend, Borghetti and his hand-picked team have been able to get quietly on with the job (though at a pace which would have tested the best of them). And serendipity has certainly come to the party too – more than once.

What can one say? It’s refreshing to once again have a genuinely competitive airline business environment in this country.