Virgin Australia Expects FY15 Q2 Profit

22nd Nov 2014

Virgin Australia showed its optimism on profitability after rival carriers cut down their respective capacities on some domestic routes that they similarly serve.

The airline is also positive that its newest low-cost unit, Tigerair Australia, will be able to break even towards the last quarter of the current fiscal year?6 months ahead of the original forecast.

Tigerair Australia became a wholly-owned subsidiary of Virgin Australia on October 17, 2014 following the latter's purchase of the 40% equity held by Singapore's Tiger Airways Holdings. The acquisition also allows Virgin the right to use the brand Tigerair in its discretion.

Virgin Australia is planning to use the Tigerair brand for its international operations out of Australia.

During the annual meeting held recently in Brisbane, John Borghetti, the airline's Chief Executive Officer, claimed that excess capacity in the domestic market is no longer an issue as rival carriers, especially Qantas and Jetstar, have stopped flooding the market with empty planes.

He admitted though that they have gone through tough times for the past two years and that they are now heading back to profitability.

He warned the investors, though, not to expect too much this year despite the drop in fuel prices as profitability won't take effect immediately. They may see profit late next year or early 2016.

His optimism on the airline's profitability was also based on its ability to capture a bigger share of the corporate travel market in the country which obviously increases yields.

Virgin posted a pre-tax loss of $45 million during the first quarter of the current fiscal year excluding that of Tigerair's. Virgin inherited Tigerair's debt after its purchase.

Mr. Borghetti, however, was a very optimistic man and he predicted that Tigerair will be able to stave off losses by half during the second quarter of the current fiscal year and break even towards the last quarter of the 2015-16 fiscal year.

Tigerair will soon relocate its base of operations from Melbourne to Brisbane alongside Virgin in order to cut down costs.

Tigerair Australia currently keeps a fleet of 13 aircraft which mostly consist of narrow-body A320 jetliners and operates a network of 12 destinations across Australia.