Virgin Australia is flying high on the back of 12-year low oil prices and higher domestic airfares.
Virgin Australia is flying high on the back of 12-year low oil prices and higher domestic airfares.
Australia’s second biggest airline, Virgin swung to a net profit of $45.7 million for the six months to December 31, with a $33.8 million benefit in the fall in oil prices offsetting the $19.2 million impact from Bali flight disruptions in November resulting from the eruptions of Lombok’s Mount Rinjani.
The result was a major turnaround from $53.1 million net loss suffered a year earlier.
Virgin expects to book a similar gain from further oil price falls in the second half of fiscal 2016, chief executive John Borghetti said.
Mr Borghetti expects Virgin to book an annual profit but stopped short of providing specific guidance.
"The group is improving its revenue and customer offering in all segments of the aviation market. At the same time, the group is maintaining strict cost discipline while optimising the balance sheet," he said.
Mr Borghetti said the group's budget airline Tigerair Australia was also making good inroads following improvements to its services and check-in process. The airline is also benefiting from a revamp of its terminal in Melbourne.
Tigerair booked underlying earnings before interest and tax of $13.9 million in the first half, compared with a underlying EBIT loss of $24.8 million a year ago.
Virgin also remains on track to exceed its target of $1.2 billion in cumulative cost savings by the end of the fiscal 2017.
Those savings will include the sale of five Embraer 190s and six of its Embraer 170s, which are currently sub-leased to Delta Air Lines. As a result, Virgin will boast a fleet of 154 aircraft.
Virgin's underlying interim profit before tax jumped sharply to $81.5 million from $10.2 million a year ago, driven by strong revenue from its domestic operations and ongoing improvements at Tigerair.
Revenue rose 11.8 per cent to $2.66 billion, with Tigerair increasing its contribution to $243.8 million from $75.5 million a year ago.
After initially opening higher, Virgin shares were down 2.75 cents at 46 cents in a slightly higher market at 1415 AEDT.
Virgin is a tightly held stock, with around 73 per cent of the group owned by three airlines: Air New Zealand, Eithad Airways and Singapore Airlines.
Attention will now turn to rival Qantas, which is due to report on February 23 and has already forecast underlying profit before tax in the range of $875 million to $925 million for the six months to December 31.
