Friday, February 17, 2017

Virgin Australia first-half profits drop, defers Boeing deliveries

Virgin Australia Holding Ltd on Friday posted a 48-percent fall in first-half underlying pre-tax earnings and deferred the delivery of new Boeing Co 737MAX aircraft after airfares tumbled due to tough conditions in the domestic aviation market.

Australia's second-biggest airline reported an underlying profit before tax of A$42.3 million ($32.55 million) for the six months ended Dec. 31, compared with A$81.5 million in the year-earlier period.

On a statutory basis, including restructuring charges associated with a cost-savings program, it reported a loss of A$A21.5 million, compared with a A$62.5 million profit the year before.

Australia's domestic aviation market has been subdued for the past year due to weak demand for flying from corporate customers, including mining companies, as well as government travelers.

Virgin said domestic yields, a proxy for average fare prices, had fallen by 5.6 percent in the first half of the financial year.

"Going forward, the group will stay focused on strengthening our financial foundation by further optimizing the balance sheet and building a lower cost base," Virgin Chief Executive Officer John Borghetti said in a statement.

The airline said it had deferred the first Boeing 737MAX aircraft to be delivered until late 2019, rather than 2018 as previously flagged, in a move that would postpone A$350 million of capital spending beyond the financial year ended June 30, 2019. It also signed a letter of intent to sell its six remaining Embraer E190 aircraft.

Virgin on Friday separately said it planned to launch flights between Australia and Hong Kong in the middle of this year as part of a proposed alliance with shareholder HNA Aviation and affiliated carriers Hong Kong Airlines and Hong Kong Express.

(Jamie Freed - Reuters)

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