Virgin Blue FY2010 profit matches forecast

Virgin Blue Holdings has reported a net profit before tax of $34.3 million for its 2010 financial year, with underlying earnings for the Group of $87.2 million before interest and tax and the underlying net profit before tax standing at $31.0 million, in line with the revised guidance of $20-40 million announced to the market in May 2010.

Virgin Blue chief executive officer and managing director, John Borghetti, said the result was in line with expectations and was influenced by the deterioration in the operating environment for all carriers during the fourth quarter.

“Achieving a $34 million net profit before tax in the current environment demonstrates that Virgin Blue’s domestic business has the capability to ride through market and economic volatility, and remain well-positioned to extend its reach in key markets.” Borghetti stated.

The profit result was delivered largely by the company’s strong Australian domestic short-haul business achieving a 2.7% increase in RASK (revenue per available seat kilometre) together with its ongoing focus on improving efficiency which produced a third consecutive annual reduction in Group underlying CASK excluding fuel (cost per available seat kilometre). CASK (excluding fuel) for FY08 was 6.80 cents; for FY09 was 6.53 cents and for FY10 was 6.21 cents.

“Our short haul business made a credible underlying EBIT of $20 million in the second half of the year. In addition our long haul business has seen improvements, particularly into the US,” Borghetti added. “The increases in RASK and the continuing reduction in CASK form a strong basis for the development of our go-forward business platform. This has already seen the announcement of the first phase of our network review to maximise the benefits from improvement in the travel market.

“In addition to [previously announced] network changes, we have two additional and very significant announcements in relation to our network. Firstly, in the second phase of our network review, Virgin Blue will be adding two widebody Airbus A330-200s which will dramatically enhance both our leisure, corporate and government offering between the East Coast and Western Australia.

“Secondly, in keeping with our strategy to build bilateral alliances in specific regions, we are announcing an alliance with Etihad Airways. The first step of this alliance will see Virgin Blue codeshare from V Australia to all Etihad Airways codeshares in October 2010, providing multiple destinations to the UK, Middle East and Europe. The agreement will also involve reciprocal frequent flyer programs where members can earn and redeem points on both carriers, and enjoy reciprocal lounge access. Together with our proposed alliances with Delta Air Lines and Air New Zealand, the Virgin Blue network will seamlessly extend its reach to many more overseas destinations, with little capital expenditure, Borghetti explained”

“In the corporate and government market, travel managers are placing a much greater emphasis on deriving value from their investment in travel. This a fundamental change in the purchasing dynamic and we are well-placed to attack the dominant player in this market, just as we did in the leisure market 10 years ago,” Borghetti added.

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