Virgin Australia has posted a third-quarter net loss of $A69 million — $10m down on the same quarter in 2016 — as it continues its struggle towards profitability.
The airline Thursday posted an underlying pre-tax loss of $A62.3 million to bring its cumulative underlying loss for the nine months to March 31 to $A20.2m and the equivalent net loss to $A90.6 million.
The airline, which posted an underlying loss of $A18.6m in the third quarter of 2016 and a net loss of $A58.8m, said the third quarter was historically its weakest and had been affected by costs associated with a range of issues.
These included its fleet simplification program, adverse foreign exchange impacts on US dollar-denominated debts and operating costs, subdued trading conditions and one-off revenue impacts of aborted attempt to service Bali with Tigerair and severe weather in Queensland.
While it did not give an estimate for its full-year result, the airline said it expected the situation in the current quarter to improve compared to the previous year’s underlying fourth-quarter loss of $A21.9m.
On the plus side, Virgin said it had reduced debt by more than $A200m and was maintaining a strong total cash balance and liquidity position that was 50 per cent higher than at the same time last year.
With accelerated debt repayments of $A169m during the first half of fiscal 2017, the group’s net debt position had reduced by 33 per cent to $A627m compared to its position at June 30, 2016.
The airline said it expected to end Embraer 190 jet operations by the end of the 2017 calendar year, with two E190s sold prior to March 31 and the remaining four due to be sold before June 30.
It has also announced it would remove all six ATR 72-500 turboprop aircraft and two ATR 72-600s as it reduces the ATR fleet to six and closes its Brisbane ATR crew base.
“It is expected the adverse cost impact of Embraer 190 and ATR fleet simplification measures will be reduced over the next 12 months as the removal of these sub-fleets progresses,’’ it said. “The group remains on track to deliver net free cash flow savings increasing to $A300m per annum (annualised run rate) from the Better Business Program by the end of the 2019 financial year.’’
Operating statistics were also subdued with group passenger numbers down 1 per cent for the quarter and capacity down 4 per cent compared to the same quarter last year. The one unit to see an increase in passenger numbers was low-cost subsidiary Tigerair Australia, where passenger numbers rose 4.5 per cent and its revenue load factor rise 3.5 points to 89 per cent.
The result comes after rival Qantas recently told analysts it was narrowing the unit cost difference between its domestic operations and that of its rival.
Qantas is expecting a full-year underlying pre-tax profit of $A1.35 billion to $A1.4 billion, although this is down from 2015-16’s record underlying result of $A1.53 billion.
In a recent decision to upgrade Qantas’s credit rating, rating agency Moody’s pointed to the unique” dynamics of the Australian market and noted Qantas had a domestic capacity share of 62 per cent and raked in 86 per cent of the available pre-tax earnings in the market.
“With its greater scale, far higher margins and a significantly stronger balance sheet, Qantas is in a very strong competitive position,’’ it said.
