Virgin annual results

[piston broke again]

Any thoughts / predictions as to what tomorrow's result is going to be? I'm calling a healthy profit, more 330's or possibly 350s eventually. 737's expanding to new regional international destinations...

[catch18]

A 1c Dividend would be nice:)

[UnderneathTheRadar]

Full year profit - $22.8mil, revenue up 20%

Good job fellas.....

[wrongwayaround]

Well done not only to a great CEO but each and every one of you working there.

... Buying new aircraft, expanding, adding meals to flights, increasing lounge capacity, recruiting heavily, re-branding... And still making a profit...

Who would have thought it'd be possible ;-)

From smh:
Virgin Australia, the country's second largest airline, returned to profit as revenue jumped almost a fifth for the year as it increased its share of the lucrative business travel market.

The carrier posted a $22.8 million annual net profit, compared with a $68 million loss a year earlier, due to increased return on fares from domestic flights.

The airline, though, declined to give earnings guidance for the new financial year because of an ‘‘uncertain economic environment.’’

Days after arch-rival Qantas slumped to a $244 million full-year loss, Virgin said a driver of its return to profitability had been its ability to snare high fare-paying corporate and business travellers.

Virgin’s revenue rose 20 per cent to $3.9 billion. Virgin said corporate and business traffic now makes up 20 per cent of its domestic revenue.

Virgin shares have easily outperformed Qantas stock in 2012, rising 68 per cent while Qantas has dropped 19 per cent, prior to today. Those movements compare with a 7.1 per cent advance for the overall ASX200 benchmark share index.

[ohallen]

Great turnaround and whilst this is a modest outcome, it was achieved during a very difficult period in which the weak were punished.

Even better is the fact that there is an all round positive vibe from the place especially from the customers, so well done to everyone.

[catch18]

Virgin announces a profit - shares go down

Qantas announces a loss - shares go up

Can anyone explain this? I don't understand....

[piston broke again]

I think its due to being below forecast. 22 mil after tax when the market was expecting around 40+.

Interesting to note, 2 more A330s to come by 2015 (from AusBT article).

[michael36]

so you're saying that because QANTAS lost less than what was predicted is why their share price went up. Doesn't seem fair to me :=

[piston broke again]

I know - me too

[TIMA9X]

zyypNel62pg

Good result, back in the black in only 12 months, well done JB & Co :ok:..... good vibes all round compared to that other major airline...

notam, I left the second story on this video as it talks about the future of business trends here in Australia.... interesting....

A bit of a nasty headline considering the plan is working....


Virgin Australia's risky corporate gamble

On the surface, Virgin Australia's annual net profit of $22.8 million appears to be a solid one.
This outcome is especially robust when compared with the prior year's result, which was a loss of $67.8 million, and when compared with the significant loss made by the Qantas Group, which was $244 million (before tax).
At the very least, the Virgin numbers must make the CEO of Virgin Australia John Borghetti feel smug, at least on the inside, given he was knocked back for the top job at Qantas a few years ago.

During my last days at Qantas I remember Alan Joyce was asked how he felt about Borghetti getting the top job at Virgin Australia, to which Joyce replied "better the devil you know".
On the basis of the relative performance of the companies in 2012, it would appear that Borghetti is the devil that Joyce, the executive team and the Qantas board, are not so acquainted with after all.

Second-half results
After digging deeper into the Virgin Australia results, however, the evidence reveals the hazards an airline faces when it chases a greater share of the corporate market.
Over the six months to December 2011, Virgin Australia reported a net profit after tax of $51.8 million, which means that over the second half of 2012 it made a loss of $29 million.
Over the same second-half period, Virgin Australia accelerated the growth in domestic capacity by 14.1 per cent, which is almost three times the long-run average. This expansion was on top of first-half growth in domestic capacity of 5.3 per cent.
The acceleration in domestic capacity in the second half of 2012 placed significant downward pressure on Virgin's domestic yields. Measured on a revenue-per-available-seat-kilometre basis, Virgin domestic yields fell in the second half by 4.5 per cent compared with the first half.
The strong first-half result also reflects the fact that Virgin gained significant load, and to a lesser extent, price benefits, from the Qantas shutdown, which occurred late in October 2011.

Corporate travel
CEO Borghetti indicated in today's results that he has reached his target of 20 per cent of total domestic revenue from the corporate and government markets, but that can be achieved simply by allocating more capacity to city pairs that have greater government and corporate mixes.
For example, sending more capacity to Canberra, the golden triangle (Sydney, Melbourne, Brisbane) and to regional mining routes will boost the corporate and government proportion of revenue.
The real meat in Virgin's strategy sandwich is whether they have stolen corporate and government customers from Qantas. This is difficult to prove because of the lack of publicly available data.
My gut feeling is that Qantas has retained a significant number of large corporate accounts, which probably cost them an arm and a leg through cheaper pricing, while Virgin has snapped up a large segment of the disgruntled small- and medium-sized corporate market.

Airfare inelasticity
The difficulty with the corporate market is that it isn't typically stimulated by average airfares.
Corporates and public servants travel not because there is a good deal on airfares, but because they must hold meetings, or they must attend conferences and other engagements that require travel.
Meetings and conferences are primarily a function of the economy - the stronger the economy, the more such gatherings take place.
The demand for meetings and conferences will also depend - generally to a lesser extent - on the total cost of travel. This total cost includes airfares, accommodation, food and beverages, land transport and the time/opportunity cost of travel. Airfares will often only represent about 15% to 20% of this total cost.
If too much capacity is supplied by an airline to a corporate-intensive segment of the market then the airline must push the average airfare down hard to stimulate customers to travel on those seats because demand is inelastic to the average airfare.
Borghetti holds a lever that can only influence 15% to 20% of the total cost of travel to the corporate, and can't influence the number one driver of that travel, which is the state of the economy.

Poaching
Virgin can only expand its yields and capacity at an above-trend pace if it is able to snatch a large number of customers from Qantas. That poaching will prove difficult for Virgin if Qantas drops its prices and matches Virgin with capacity increases of its own.
This outcome assumes, of course, that Qantas' on-time performance remains high, its frequency at the peak on critical, corporate-dense city pairs remains strong, and its at-airport and in-sky products are high standard. On the basis of recent performances and struggles, these may be strong assumptions.
Procurement departments of companies all across Australia that have not yet negotiated their corporate travel contracts should be rubbing their hands with glee over the coming months because the deals emanating from Qantas and Virgin will be the best for years if capacity at the market level continues to grow strongly.

Read more: Virgin Australia's risky corporate gamble (http://www.smh.com.au/business/earnings-season/virgin-australias-risky-corporate-gamble-20120828-24y2k.html#ixzz24pDqdZ4Z)

[virginexcess]

I thought the same TIMA9X with regard to being a nasty story.

Interesting it came from an ex Qantas employee, and probably has a tinge of the Qantas arrogance. (I'm talking corporate arrogance, nothing to do with pilots, cause they're all good blokes)

I wouldn't argue against the theory behind his assertions, but i would argue that the lay mans view (which is walk into a Virgin Lounge) would tell me that the facts don't support the theory.

3 years ago you rarely saw a suit in a V lounge. Now days you can't get a seat because they are all full of corporate types. I'm guessing that most of the suits are ex Qantas flyers. I doubt that your traditional Virgin business traveller i.e your Brett Godfrey Boganaire, has suddenly raced out and bought a suit because they changed the salad bar.

I'm still betting on Virgin, but only as long as JB is there. He's one of a kind in the Australian industry and I am not confident about finding a replacement that can carry his vision forward.

[PPRuNeUser0161]

This should be a warning for those at Australia's soon to be second carrier, management and employees. You wont stop the rot unless you change the way you do things. Its real easy making an airline model work from the ground up but when you have to reform from an old model that is out of date and inefficient there will be pain.

SN

[C441]

Interesting it came from an ex Qantas employee, and probably has a tinge of the Qantas arrogance.

Having read a number of Tony Webber's articles recently, I have found that he is just as much as home finding negatives in the Qantas results as he was yesterday with the Virgin results. Maybe realistic rather than Qantas-arrogant.

[Ultergra]

''We are certainly not going to go away. If people think I back away, they obviously don't know me,'' he said. ''Irrespective of what they do, our strategy will not change.''

Well, if that strategy is going to sink the company, then I guess it'll sink.. Bit of QF mentality there..

[porch monkey]

I have no doubt he will change things if they are required, in the circumstances you describe ultergra. I would suggest that statement is for the necessary "appearances", rather than the "QF mentality" you ascribe it to.

[Ultergra]

The Age:

Although Virgin swung to a $22.8 million annual profit, from a $68 million loss previously, the impact of the competition was evident in its earnings in the second half when it recorded a $29 million loss.

Who has deeper pockets wins. I'm all for Virgin, but you have to recognise the impact this will have on both sides of the fence.

But the competition is healthy, and I'd love to see Virgin given room to grow and room to compete without it being unfair. It's a win for the customer, and it will be a win for Qantas employee's. It means QF will have to invest in it's product and in it's people.

QF have had it too good for too long, it's about time they are pushed, but will they just roll over and die like they are for long haul?

[Whiskery]

The Market loves it too. VAH stocks break through the 50 cent mark.
How high will they go? :ok:

[piston broke again]

Had to laugh at Carrie bickmores slip of the tongue with 'Qantas Customers' on 7pm project tonight. You tube people!

[hoss]

I guess she won't be flying with those c$@ts anymore. Virgin from now on. Next week we'll probably have the Chanel 10 corporate account.

[wrongwayaround]

http://www.youtube.com/watch?v=e3broOBpKIs&feature=youtube_gdata_player


Think that was planned!?

[Transition Layer]

And now for some spin from the most loved airline management team in Australia: :rolleyes:

Virgin Australia Full Year Results
============================================================ =============
Virgin Australia has reported a statutory Net Profit After Tax of $22.8 million. However, with a $29 million
loss in the second half of the year, Virgin's profit figures have disappointed some shareholders.

It's important to note that Virgin - with a domestic market share of around 30 per cent - made an underlying
EBIT of $115.6m, while Qantas and Jetstar - with a combined domestic market share of 65 per cent - made a
combined underlying EBIT of over $600m.

Virgin is half the size of Qantas yet its profit was just one sixth the size of ours. This shows the Qantas
domestic strategy to achieve a profit maximising 65 per cent market share target is working.

[Dragun]

Virgin is half the size of Qantas yet its profit was just one sixth the size of ours.

Yes idiots, that's because they conveniently forgot to point out that "half the size" refers to Qantas domestic only whereas "one sixth" under the "Qantas" part includes most if not all of the following: Eastern, Sunstate, Cobham, Network and QF Domestic...possibly AAE? Virgin counts itself and a (currently) tiny turboprop operation through Skywest.

That many airlines stacked against two is always going to show figures like that. How dumb do Qantas think their employees are?

[porch monkey]

Sadly dude, the answer to your question is self evident. But you meant it rhetorically anyway, I know.:{