Virgin EBIT grounded at start of FY05

[Wirraway]

Shaw Stockbroking

Virgin EBIT grounded at start of FY05
4/08/04 By: Rikki Bannan

Virgin Blue Holdings Limited (VBA) chairman Chris Corrigin said today that industry conditions remained challenging after it posted earnings before interest and tax for the first four months of FY05 that were 22% lower than the previous corresponding period. However, the discount airline also said that revenue was 29% higher in the period.

“Earnings before tax were down 22% compared to the previous corresponding period, driven by yield erosion and the impact of significant new capacity," Mr Corrigan said at Virgin’s AGM today.

"Current market conditions continue to be a challenge for the global aviation industry," he commented

"Following on from terrorism and SARS, in recent months, record high fuel prices have resulted in many carriers around the world, including Virgin Blue, having to impose a fuel surcharge to help cover the increased costs of the business,” Mr Corrigan said.

"Here in Australia, the market is also facing increased competition following the launch of Jetstar," he added.

Mr Corrigan told shareholders that yields in the domestic and trans Tasman markets continued to be under pressure and were expected to be for the remainder of the financial year as new capacity was absorbed and the competitive environment stabilised.

Virgin advised that the earnings decline reflected the addition of more than 60% capacity measured by available seat kilometres (ASKs) compared to the corresponding period in 2003.

The group noted that the increase in capacity would slow during the second half of the year, with ASK growth scheduled to be some 30% compared to the prior corresponding period.

Virgin Blue reported a 47% lift in net profit to $158.5 million for the year to March 31.

At 1130 AEST Virgin shares were 11c or 5.4% lower at $1.93.

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[Capt Stabbin]

VBA shares are continuing to fall. As low as $1.78 a little earlier today.

[Wirraway]

Bloomberg

Virgin Blue Shares Drop; Company Posts Earnings Slump (Update1)

Aug. 4 (Bloomberg) -- Shares of Virgin Blue Holdings Ltd., Australia's second-largest carrier, had the biggest slump since they began trading in December after the company said earnings fell 22 percent in the first four months of the year.

Virgin Blue shares fell 22 cents, or 11 percent, to A$1.82 at 12:17 p.m. in Sydney. The company's pretax earnings declined because it filled fewer seats and Qantas Airways Ltd.'s new discount airline began services, Virgin Blue Chairman Chris Corrigan told shareholders at their annual meeting in Brisbane.

Like Europe's biggest low-fare airline Ryanair Holdings Ltd., Virgin Blue is having to fend off retaliation from full-service carriers such as Qantas after grabbing one third of Australia's domestic market. Qantas's discount carrier, Jetstar, aims to capture 10 percent of the market by year-end, it said last month.

"Yields in the domestic and trans-Tasman markets continue to be under pressure and are expected to be for the remainder of the financial year as new capacity is absorbed and the competitive environment stabilizes,'' Corrigan said. ``In Australia, the market is facing increased competition following the launch of Jetstar.''

Ryanair yesterday forecast ticket prices may fall 20 percent this year. It slashed fares to win passengers and underpin earnings growth after price cuts by British Airways Plc and Deutsche Lufthansa AG.

Virgin Blue is expanding its fleet and adding destinations as it seeks to increase its share of Australia's air travel market. The discount carrier, founded by Richard Branson four years ago, said earnings fell in the first four months as capacity increased.

Shares of Patrick Corp., which owns 45 percent of Virgin Blue, fell 4.7 percent to A$5.27. Patrick is Australia's largest port cargo handler.

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[The Librarian]

Closed at $1.75 down 29c although QF lost 9c also.