Virgin Australia Back on Track to Profitability

Virgin Australia Back on Track to ProfitabilityVirgin Australia has recorded its best half-year financial results in 11 years. Announcing a statutory profit after tax of $73.8 million from July to December 2018, it’s the airline’s best first-half result since the 2008 financial year and a significant improvement from last year.

The standout performer for the Virgin Australia Group was Virgin’s domestic operations. Velocity Frequent Flyer also continues to be highly profitable. But Tigerair and Virgin Australia’s international arm are still loss-making.

With just over a month until new Virgin Australia CEO Paul Scurrah takes over, the improved profitability is good news for the airline.

Restrained capacity growth helped Virgin Australia’s domestic division to achieve a 10.3% growth in revenue. This is largely thanks to higher airfares, but load factors (the percentage of seats filled by paying customers) also improved on average by 4.1% since last year.

Meanwhile, Virgin Australia’s international operations lost $12 million in the first half of the 2018-19 financial year. The loss is partly due to the fallout from the end of Virgin Australia’s alliance with Air New Zealand back in October 2018. Virgin also appears to be struggling against stiff competition from incumbents Qantas and Cathay Pacific on its Hong Kong routes. Qantas and Cathay Pacific have a 90% of market share on flights between Australia and Hong Kong and are currently seeking approval for an expanded codeshare partnership. Virgin has objected to this proposal on anti-competitive grounds, and the International Air Services Commission will decide whether to allow the deal in the coming weeks.

External factors including rising fuel prices and exchange rates are also proving a challenge to the airline’s bottom line.

Virgin’s low-cost subsidiary Tigerair reported an $8 million loss for the first half of the year.

Meanwhile, Velocity Frequent Flyer is making a healthy profit. There are now 9.5 million members of the Velocity Frequent Flyer program, with 347,265 members having joined in the past six months alone. Velocity redemptions were also at record highs in the second-half of last year.

Join the discussion on the Australian Frequent Flyer forum: VA half yearly results to 31 December 2018

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Matt Graham
The editor of Australian Frequent Flyer, Matt's passion for travel has taken him to over 60 countries… with the help of frequent flyer points, of course!
Matt's favourite destinations (so far) are Germany, Brazil, New Zealand & Kazakhstan. His interests include economics, aviation & foreign languages, and he has a soft spot for good food and red wine.

You can contact Matt at [email protected]