Virgin results today

[Comoman]

- Launching inclusive F&B from April for flights over 2.45 hours.
- A330 Per-Bris from May
- 8 x A330 by 2015

 

[markis10]

VA 1H results posted

Good profit results with $61M before tax, improved revenue and debt reduction.

Food and Beverage to be inclusive on flights over 2H 45M (eg to Darwin).

Bundaberg and Moranbah to get ATRs from April.

Brisbane Perth double daily A330 service (what a surprise).

http://www.asx.com.au/asxpdf/20130226/pdf/42d8jnk12qz1v2.pdf

 

[moa999]

Re: VA 1H results posted

SMH has a slightly different spin.

Virgin scarred by battle with Qantas

cough result - net profit down two thirds, no forecasts provided for second half.

 

[markis10]

Re: VA 1H results posted

SMH has a slightly different spin.

Virgin scarred by battle with Qantas

cough result - net profit down two thirds, no forecasts provided for second half.

They have not provided guidance as per the AGM, different to a forecast which is provided which is to have an improved underlying profit before tax in FY 2013. Not sure they used the words cough result, give the expected reduction form competition and costs involved in the game change, frankly I am surprised they made a profit given the competitions hell bent pursuit of S curve fundamentals by pumping up capacity.

 

[oz_mark]

- Launching inclusive F&B from April for flights over 2.45 hours.

Interesting slice! Will need to work out which routes make the cut!

 

[cmon0005]

Re: VA 1H results posted

Food and Beverage to be inclusive on flights over 2H 45M (eg to Darwin).

That's not very Premium of them! that's very budget of them!

Love this bit "Successful implementation of Sabre", working now.... but overall successful?

 

[markis10]

Re: VA 1H results posted

That's not very Premium of them! that's very budget of them!

Love this bit "Successful implementation of Sabre", working now.... but overall successful?

I think you will find that is a stepping stone, eventually all flights will have it, just taking it slowly. Not a bad idea given Catering is one area they clearly struggle with, as is Sabre at present, agree its too early to make a call on that one.

 

[rtyuiop]

Re: VA 1H results posted

And one more piece of media interpretation:

Virgin's profit falls by 56%

With one of the more amusing pieces of business analysis on the fly I think I've ever seen - talking about the profit fall between quarters: "The difference was mainly the result of Qantas' industrial dispute in the previous corresponding period, which benefited Virgin". It reads like that was actually in the results info released by Virgin .

 

[smit0847]

Re: VA 1H results posted

Considering how much money they spent in 2012 and the brutal capacity competition theyve fought with Qantas (anyone else flown a half full MEL-SYD evening peak service?) Im impressed that they actually made a profit at all. This was always going to be a difficult period given how much investment they are making.

 

[VHOEJ]

Re: VA 1H results posted

Got to love Borghetti spin - mentioning the carbon tax result. Gee, I didn’t hear QF mentioning that at all – I think he is clutching at straws to make a bad result look better. And no mention of the corporate accounts – he mentioned that they wanted to get 20% of the market but clearly haven’t so will just ignore it.

Watch the share price at the end of the day – they should be making a profit but to have drops by that much (when the market expected a lot better) is not a good result. Any time you fall very short of the analysts expectations, that can’t be a good thing.

 

[markis10]

Re: VA 1H results posted

Watch the share price at the end of the day – they should be making a profit but to have drops by that much (when the market expected a lot better) is not a good result. Any time you fall very short of the analysts expectations, that can’t be a good thing.

The market expected 65M, so $61M is not "that much" of a drop, circa 9%.

Sydney-based Virgin Australia's underlying pre-tax profit, a measure more closely watched by analysts, fell to A$61.0 million from A$96.1 million, slightly below the A$65 million average of five analysts' forecasts compiled by Dow Jones Newswires. The difference between underlying profit and bottom line profit can be attributed to the cost of introducing a new ticket booking system.

https://www.adr.com/Markets/GlobalNewsStory?docID=1-DN20130225014941-24BUGEOCBFE73FINIMLAGMKMCQ

 

[Deleted member 29185]

Re: VA 1H results posted

The difference between underlying profit and bottom line profit can be attributed to the cost of introducing a new ticket booking system.

I'm so glad they've introduced a new ticketing system.

Now the introductions are over, I wonder when they'll start making it work.

Overall, a AU$61m profit is far better than the losses they had a few years ago. GFC is slowly coming to an end, so their business model seems to be survivable albeit somewhat tarnished of late.

 

[markis10]

Re: VA 1H results posted

I'm so glad they've introduced a new ticketing system.

Now the introductions are over, I wonder when they'll start making it work.

Overall, a AU$61m profit is far better than the losses they had a few years ago. GFC is slowly coming to an end, so their business model seems to be survivable albeit somewhat tarnished of late.

I bet a lot of that profit is coming from your favorite aircraft type

 

[yohy?!]

Re: VA 1H results posted

interesting result - overall to me it reads positive for VA and a confirmation they are on the right track.

QF has slashed their revenues by a 100-odd million by capacity dumping to keep AJ's market share KPI and the net result seems to have been causing VA to take over/take stakes in SkyWest and TT to nullify their efforts (with SQ essentially paying for most of it).

 

[Noob]

Re: VA 1H results posted

interesting result - overall to me it reads positive for VA and a confirmation they are on the right track.

QF has slashed their revenues by a 100-odd million by capacity dumping to keep AJ's market share KPI and the net result seems to have been causing VA to take over/take stakes in SkyWest and TT to nullify their efforts (with SQ essentially paying for most of it).

Indeed, QF must agree the VA "game change" strategy is working (i.e. increasing share of the corporate market etc.) if they are willing to sacrifice profits to "slow the blow".

If they didn't think the strategy was working, or not going to work, they wouldn't be making so much noise e.g A330 product upgrades to VA standards, dumping large amounts of capacity above market demand, retraining staff, refreshing the 767 J cabins, getting rid of John Travolta for Miranda Kerr.... etc.

 

[samh004]

Re: VA 1H results posted

And one more piece of media interpretation:

Virgin's profit falls by 56%

With one of the more amusing pieces of business analysis on the fly I think I've ever seen - talking about the profit fall between quarters: "The difference was mainly the result of Qantas' industrial dispute in the previous corresponding period, which benefited Virgin". It reads like that was actually in the results info released by Virgin .

It was, check the ASX PDF at top of thread. It was listed on the first page

 

[rtyuiop]

Re: VA 1H results posted

It was, check the ASX PDF at top of thread. It was listed on the first page

What the ASX PDF says is that the impact to Virgin of the QF industrial action was $6million, and the difference in profit from the previous corresponding period was $35.1 million - even if the reporter is comfortable standing by 6 mil out of 35 as 'mainly' , the carbon tax was listed as by far a more important factor at $24.4 million...

I still think it's pretty hilarious 'reporting'!

 

[medhead]

Just watched Borghetti on business lateline. They raised QF revamped A330s as a response to the VA transcontinental strategy, with the implication that QF are coming back. Given the 2 year lag it seems a pretty laughable response.

 

[eastwest101]

Yes - it was an interesting and wide ranging interview. Some of Borghetti's comments address some of the points that people made here. (I have changed the reference from A380 transcon to A330 - transcription error?).

I love his answer to the question about QF upgrading their transcon A330 services.

TICKY FULLERTON, PRESENTER: Last week Virgin Australia won Domestic Airline of the Year at Roy Morgan's Customer Satisfaction, but the domestic market is proving to be a very aggressive fly zone.

TICKY FULLERTON: Today the airline revealed half-year results hit by a flood of new seat capacity on the market, the highest since 2004 - thanks to Qantas as well - and a net profit of $23 million, down from $52 million in the previous period, which also benefitted $6 billion from Qantas' fleet grounding last year. I spoke to CEO John Borghetti after his analyst and media briefings.

TICKY FULLERTON: John Borghetti, thank you for joining me again.

JOHN BORGHETTI, CEO, VIRGIN: Hi, Ticky. Great to see you.

TICKY FULLERTON: If I could coin a phrase, the game has really changed in the domestic market, this flood of capacity.

JOHN BORGHETTI: I guess you could say it's game on. You know, the fact is that two years ago we - I remember standing in this very room giving an outlook and saying that we had to change our business, we had to reposition it and diversify our revenue base to shoulder - to fend off any shocks that could occur, whether they'd be floods, etc. What I didn't expect at the time is that we had to fend off floods of capacity as well and - but we've managed to do that and we've done it very well, I think.

TICKY FULLERTON: You slightly disappointed the market today, it would seem. Revenue's up, profit's down. Now Qantas was never going to let you get away with taking the corporate market away from them, was it?

JOHN BORGHETTI: Well, we don't want all the market, but we are making good progress and our numbers are up in the corporate market.

TICKY FULLERTON: They're very driven by this concept of market share overall in the domestic market. Their strategy is obviously a defensive one. Who is going to come out ahead in this game?

JOHN BORGHETTI: Well, I think we've proved in the last six months that we have come out ahead. I mean, if you exclude the Boeing payments on the Qantas results, our performance has frankly outshone them on a number of fronts. Our yield performance was better and so on. We've always had a view that capacity is a result of strategy; it shouldn't be your strategy. And that's exactly the path we've gone down. And we've grown capacity significantly on the Perth route. If you look at all our operations to Perth, we've put wider aircraft for a good reason, and that is, they're a much more comfortable aeroplane to fly in, so you're attracting better yield passengers. But when you look at our capacity growth on the rest of Australia, it's actually been very moderate; in some cases it's been below market growth. Conversely, if you want to stick to a particular line in the sand, so to speak ...

TICKY FULLERTON: Because the market share is about revenue kilometres, it's about distance, isn't it?

JOHN BORGHETTI: It's about distance, exactly right, Ticky. And so for every seat that we put on on Sydney to Perth, you need to put on 10 seats on Melbourne-Sydney to compensate for that distortion. And that's exactly what's happened. If you look at our growth on a triangle, we've grown at about 3 per cent. Jetstar's grown at I think 50 per cent.

TICKY FULLERTON: Well, Qantas' Alan Joyce says he reckons that they're at a turning point, he said last week. He's going to take you on more on the trans-continental route with a reconfiguration of his widebody's A-330s and he said this will help the airline, "leap frog anything the competitors are doing".

JOHN BORGHETTI: Well then he's got nothing to worry about, has he?

TICKY FULLERTON: Let me move to a very significant item to hit your profits and that is the carbon tax, which, as a result of all this competition you weren't able to recover from the customer. I would imagine that you were a sure fire Tony Abbott vote, aren't you?

JOHN BORGHETTI: Well it's actually very interesting because when the carbon tax was introduced, we always said it was going to be about between $40 and $50 million a year in terms of cost. But we were confident that to some degree we'd be able to recoup some of that through airfares. But of course because of the capacity flood, as they keep calling it, that's occurred in the market, pricing has taken a hit.

TICKY FULLERTON: Meanwhile your reservation system and indeed this code sharing in Australia is paying dividends presumably both domestically and your international business, which has done well this half.

JOHN BORGHETTI: Absolutely. And this sabre system, this SabreSonic, which is the name of the system, will open global reach for us.

TICKY FULLERTON: Do you feel there's going to be much of a change in the international competition now that Emirates and Qantas have tied up?

JOHN BORGHETTI: Well, that's an interesting point and we see that as an opportunity, frankly. And that's - you would have seen us announce co-chair with Singapore Airlines from Asia to Europe because we feel that there is an opportunity there now of linking Asia with Europe. The Middle East is very important and of course we fly to Abu Dhabi and our relationship with Etihad is a very strong one. But the fact is that in this market you need to give your customers a choice of both. You cannot decide that one is more important than the other. At least we don't believe that that's right. So it's a perfect opportunity for us to do both.

TICKY FULLERTON: Just on your acquisitions, Sky West and Tiger in particular, the ACCC is considering this. Now, various people, airports included, who are worried about indications from Singapore Airlines that Tiger Australia may be wound up if the ACCC fails to authorise the Virgin transaction. Now, do you see that as a very convincing argument for the ACCC or a little bit of a convenient argument, given that they're your shareholder, Singapore?

JOHN BORGHETTI: Well, I don't think Singapore Airlines has ever said that. I think the Singapore board - sorry, the Tiger board has said that and that isn't Singapore Airlines, it's an independent company. The fact is this is a business that's been losing between $15 and $20 million every three months and they've got 10 or 11 aircraft. How long can you sustain those losses of $60 to $80 million a year? Very difficult. Now, it's not for me to say whether they're going to continue or not. That's their decision.

But what I do know is that if we do get Tiger, two things will happen. The first is Tiger will grow and Tiger will bring competition to Jetstar. Because if you look at the budget market today, we run the risk if we don't pick up Tiger and do something with Tiger and expand it, of there being a monopoly at the budget end with just Jetstar, which is a reverse situation to two years ago when we had a monopoly situation with just Qantas at the premium end.

So, the good thing for us is that if we are successful in getting Tiger, and of course SkyWest for that matter, and we already have Virgin positioning itself in a premium space, we'll have three airlines that will be the lowest cost providers in their respective spaces, and that's a very, very powerful, competitive position to be in.

TICKY FULLERTON: John Borghetti, thank you for very much for joining us.

JOHN BORGHETTI: Thank you for speaking to me.

 

[medhead]

Ticky did say A380, so not a typo.