Virgin Australia’s international operations and low-cost subsidiary Tigerair are particularly struggling. Virgin Australia lost $75 million on its international operations last financial year, following the end of its trans-Tasman alliance with Air New Zealand. Low-cost carrier Tigerair, meanwhile, lost $45 million last year.
Virgin Australia will soon begin cooperating more closely with its partner Virgin Atlantic to offer more convenient one-stop flights from Australia to London via Hong Kong. This could improve Virgin’s loads on the Hong Kong route, but the ongoing Hong Kong protests remain a problem.
Rival Qantas last week announced it will slightly decrease capacity to Hong Kong due to weakening demand between Australia and Hong Kong. This will see Qantas downsizing many of its Airbus A330-300 Hong Kong services to A330-200s with fewer Economy seats over the coming months.
The only part of the Virgin Australia Group to improve its performance on the previous year is Velocity Frequent Flyer, which made a $122.2 million profit. The total revenue for Velcoity Frequent Flyer was $411 million, so that’s an impressive operating margin of 29.7%. Velocity Frequent Flyer now has around 9.8 million members.
Qantas Frequent Flyer, the main competitor to Velocity, currently has 12.9 million members and an operating margin of 22.6%.
Virgin Australia’s new CEO Paul Scurrah faces a tough challenge to turn the loss around and return the airline to profitability. The airline has already announced 750 job losses from management and corporate roles. The airline will also review its fleet, route network and suppliers over the coming months, with an eye to potentially axing uneconomic routes.
Last week, the Qantas Group announced a strong full-year profit of $1.3 billion before tax for the 2018-19 financial year – in stark contrast to the Virgin Australia loss.
Join the discussion on the Australian Frequent Flyer forum: Virgin Australia Financials 2019/20