Virgin Blue on cloud 9 with results

[Yada Yada]

Virgin Blue on cloud 9 with results
Rod Myer
August 24, 2006

VIRGIN Blue has flown into the sunshine despite the gloom surrounding much of the airline sector, reporting a 12 per cent jump in net profit for the nine months to June.

The result comes despite spiralling fuel costs and increasing security concerns. The company is also looking at emulating Jetstar's international strategy by developing an Asian network.

Managing director Brett Godfrey said Virgin was well placed to perform even if the economy stumbled. "If we do see some softening of consumer sentiment, which is what some people are suggesting … people tend to trade down and try things they haven't tried before," Mr Godfrey said.

In the nine months to June, the low-cost carrier had a net profit of $84.5 million despite fuel costs jumping $70 million. Fuel now accounts for 26 per cent of Virgin's overall costs compared with 14 per cent three years ago. Mr Godfrey said Virgin "was in a sweet spot" as a result of higher efficiencies and stronger passenger numbers. This had come despite being caught "in a pincer movement between Qantas and Jetstar" in the past couple of years.

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It's great to see that Virgin Blue is operating strongly despite the issues it has had to face over the past 12 months, e.g. ownership, high oil prices, and strong competition. Way to go.

 

[Yada Yada]

Virgin Blue shows Qantas why it's the Red Baron

Virgin Blue shows Qantas why it's the Red Baron
Stephen Bartholomeusz - August 29, 2006

In an environment where fuel costs are ravaging and destabilising the airline industry, the contrast between the recent Qantas, Air New Zealand and Virgin Blue results is stark and intriguing.

The halving of Air New Zealand's earnings last week was, like Qantas' results a week earlier, as anticipated. Soaring fuel costs tore holes in both airlines' profitability. So why didn't they do the same to Virgin Blue?

In the answer to that question, and the puzzle of how Virgin Blue was able to increase profit 12 per cent for the nine months to June — and increase its profit margin — while around the globe airline profits are being decimated by their fuel costs, lies something disturbing for Qantas' Geoff Dixon.

Dixon would have been reasonably satisfied, in the circumstances, with the $480 million profit Qantas reported, although that profit included $104 million of damages from Airbus for delayed delivery of new planes. Despite the 30 per cent decline in profit, Qantas retained its position as one of the handful of solidly profitable traditional carriers in the world.

He would, however, be concerned about the contrast between Virgin Blue's performance and that of his own group and, in particular, the unflattering comparisons between Jetstar and Virgin Blue. Jetstar, excluding $15 million of one-off costs for launching its trans-Tasman and international services, experienced an

$11 million decline in pre-tax earnings to $25 million. Virgin Blue's pre-tax profits were
up 16 per cent to $123 million. Looked at more closely, Virgin Blue generated more revenue per passenger ($133 versus $122) at an almost identical cost per passenger ($120) and therefore made more profit per passenger ($12.60 against $1.80).

It also had higher load factors (77 per cent against 74 per cent). Where Jetstar's yields, margins and profits fell, Virgin Blue's rose.

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There is some interesting info in this article. Well worth the read.

 

[JohnK]

Re: Virgin Blue shows Qantas why it's the Red Baron

There is some interesting info in this article. Well worth the read.

Very interesting read. Thanks for the articles Peter.