Virgin Blue announces losses
 

Virgin have just announced an expected loss. Extremely tough economic times for airlines.
I hope this doesn't shift focus for the longhaul QF Pilots trying to shore up job security.


AAP March 23, 2011 11:22AM
VIRGIN Blue shares have taken a big hit after the airline said high fuel prices, adverse weather and natural disasters would result in a before tax loss of up to $80 million for 2010/11.

The airline group, comprising Virgin Blue, Polynesian Blue, Pacific Blue and V Australia, said it expected to post a full year before tax loss in a range between $30 million to $80 million.

"This assumes no further significant increase in fuel prices and no material deterioration in the trading environment," Virgin Blue said.

The guidance excluded hedging ineffectiveness, Virgin Blue said.

At 10.15am (AEDT), Virgin Blue was down 2.5 cents, or 7.58 per cent, at 30.5 cents, the lowest since August 26, 2010.

At the airline's 2010/11 first half results presentation in February, Virgin Blue chief executive John Borghetti said the second half would be "challenging", but declined to issue specific earnings guidance, saying it was too early to do so.In a statement today, Mr Borghetti said: "We have witnessed an unprecedented number of significant events in an extraordinarily short period of time, including natural disasters and a sharp spike in fuel prices."

"These events have severely impacted consumer confidence, resulting in a slower than usual recovery in tourism."

Virgin Blue said that since February, soaring jet fuel prices had added an extra $50 million to costs for the second half of 2010/11.

The airline also estimated the impact of the Christchurch earthquake at $15 million.

It had previously announced that the impact of Cyclone Yasi and devastating floods that swept through Queensland over the Christmas and New Year period would cost $50 million.

"While VBA has initiated an action plan which identifies cost savings and revenue initiatives, including fuel surcharges and capacity reductions, this will only partially offset the impact of these events on FY11 profit."

Virgin Blue posted profit before tax of $34.4 million in 2009/10.

Mr Borghetti said the current market conditions validated the airline's plan to wean itself off the heavy reliance on the leisure market and look for a larger share of corporate and business travellers.

"We are more confident than ever that our strategy is the right one," Mr Borghetti said.

I know that J* has put out an email to staff cutting all non-essential spending and capacity cuts due to the Japan, Christchurch disasters and also the fuel price stating that the Qantas Group performance is now looking pretty poor. Good time for J* and Qantas to plead poverty and will result in lots of negative press for the Qantas pilots as the whole 26% payrise claim is out there in the public domain whether it is true or not. :eek:

Pretty hard to make a reasonable dollar when you have the hands of the Government permanently around your throat everywhere you go. Add to that consumers that expect $49 fares in the year 2011.

It cost me $70 to get a busted arse filthy cab from town to the airport the other day (and I had to navigate). Fair go. Get real.

When is the industry going to get a fair go?

One of the questions Sen. Heffernan has constantly raised in the Inquiry is how the industry can survive without a reality check on fare structures, & that the public need to be re-educated on what it really costs to fly from "A" to "B." Of course, fat lot of good it would do now to raise prices to a more realistic level, because Joe Public will simply vote with his feet & go down the road to whoever is offering seats at $20 cheaper. I know that when I get mates asking me how our loads are at the moment, I respond by telling them they're asking the wrong question; what difference does it make if we've got a plane full of bums on seats - if they all bought their tickets at fire sale prices!

Whilst it's not encouraging to hear of reduced profits or, heaven forbid, posting a loss for the year, JB has got it absolutely right with the strategy to go after the corporate "cream" & reduce our current over-reliance on the leisure market. In this regard he has my full vote of confidence. In the short term things will get worse before they get better, but I believe they will. Until the next time. :E 'Tis a fickle business, this aviation thing.

Not only the industry being given a fair go, how about income earners? Being taxed into oblivion with very little in return, such as schools, hospitals, police and roads.

The obscene amount of money being spent at the moment by both major political parties here in NSW on radio and tv is disgusting. Instead the money should go into the above :*

My wife works with special needs children in state primary school. A young boy with a motor neurone disease is not getting funding for special assistance.

When asked a local member said what is the use, they will not amount to anything anyway :(

He will probably be more blessed than that oxygen thief.

As to VB announcing a loss watch all the naysayers come out and yell the sky is falling, dust off your resume, blah blah blah. You know what get over yourselves.

We need a complete shift in living our lives and society as a whole. Me I am going to try and find a way in helping this young boy, maybe if we all helped just one other person in our lives the world would be a better place.

Note to the Qantas Board, stop wasting money on J* and get back the premium business....

When fares are fixed prices between locations, and airlines start competing on service, rather than price.

Capitalism is great in theory, but like communism, does not work when put into practice. Something or someone always has to give.

Don't get me started Servo or I'll be here all day and night going off about the allocation of taxpayer dollars. In short my solution? Its not popular but I say reallocate the money spent on able bodied people not willing to work or travel to find a job and give it to people that can't fend for themselves such as the disabled or the severely injured/unwell. Take the hard line: "You have 12 months to get a job after that the money is going to the disabled."

As for our industry I personally see it as part of the infrastructure of our economy and therefore it should be levied taxed and bullied less.

Hey Missa Hatt - You no picka onna my Cab, Buddy, I getta my Mate Missa Gaddafi onto you Bigga time, soon. My a Yella Forda Foulcan issa Nice Ride , you getta cheep ride Missa Hat , xxxx

Funny how things are always doom and gloom in an EBA year. :D

Quote:
Mr Borghetti said the current market conditions validated the airline's plan to wean itself off the heavy reliance on the leisure market and look for a larger share of corporate and business travellers.
Note to the Qantas Board, stop wasting money on J* and get back the premium business....



I wouldn't want Qantas to use the JB business model. More big CC losses to come..:{

Tonight's news:

THE worst six months in Virgin Blue's 10-year history will send the airline well into the red this year as it battles soaring oil prices, a string of natural disasters and weak demand in its core leisure market.

The airline warned yesterday that it expected to post a pre-tax loss for 2011 of between $30 million and $80 million, its fourth profit warning in the past 12 months.

Analysts said the warning implied a second-half pre-tax loss of between $100m and $150m, making it Virgin's worst-ever half year. Virgin shares closed 6 per cent lower at 31c.From The Australian:

You could set your watch on it. Forget the GPS clock in the flight deck it drops out occasionally.

Where is the "Like" button (as in Faceb**k) for what Mr Hat said?

why wouldn't they spend more money on J* now when Borghetti is trying to move up-market?

Borghetti is forcing too many changes in DJ in too short a period. They've been caught in no man's land - trapped between the bottom and the premium end of the market

DJ's entire legacy is based on low cost - this includes their operations, systems etc. It will take some major shakeup to get to where he wants - he's rocking the boat too hard and taking in a bit of water!

I have to agree, Virgin was always set up to operate at the low cost end of the scale, I can see exactly what they are trying to do by attracting more business customers but at the moment they are in the 'middle' of the two markets. Along with business customers comes the need for better product, lounges etc, not to mention a big uptake in staff numbers i.e at a time when most airlines are trying to cut costs Virgin is going to have to invest and raise costs. It will be interesting how it pans out, hopefully it will be sucessful, the more competition the better.

As a self funded sometimes business traveller, around once a month and overseas to Asia or Europe no more than four times a year, Virgin Blue usually gets my domestic business out of CBR. I like the E-jets if they are on the route at the right time to Melbourne, and to Brisbane.

Just don't see them having ever been like Deathstar. A decently good fare for a regular flight, no buggering around, does it for me, and Qantas is something I'd go back to if they get rid of the old tatty 737s. Never fly to Sydney, too easy to drive, so don't see any risk of having to fly the DJ turbos when they turn up.

So who says JB is smart?
 

Virgin hedged on crude rather than Jet fuel.


In an effort to mitigate the possibility of rising fuel prices, Virgin Blue sensibly took out hedging contracts. Unfortunately, most of its hedging is against crude oil price rises. Even worse, it hedged against prices rises in the American benchmark, West Texas Intermediate.

While the American benchmark grabs all the headlines when it comes to oil prices, Australia prices most of its oil against a Singapore benchmark that is based on a Malaysian crude, Tapis, while Europe benchmarks its prices against a blend of North Sea oils known as Brent.

There have been some remarkable differences in those prices in recent months. West Texas Intermediate yesterday was nudging above $104 a barrel. Brent crude, on the other hand, was above $116. And Tapis was trading even higher at $120.

For Virgin Blue, that spells trouble. With Singapore jet fuel now trading at a huge margin above American crude oil, the airline has become seriously exposed to fuel price rises. It has hedging against that margin too, but only for about half the difference.

Who says JB made that decision? He hasn't been there long enough.

Looking at VB have stuffed up their fuel hedging in the past I think you will find it was the previous CEO's work again. It's going to take a few years to unwind the mistakes of the last 10 years in this is just one many.

I think like all changes there are many things you only discover once you get in the job.

With all the off-balance sheet shunting that was the hallmark of the Branson-Godfrey style of thinking, my view is that we are actually seeing a clearer picture of the business. (eg the write down in JB's first weeks etc).

Setting aside the 'auto-react' mode of the market, I believe the fiscal reporting offered since Borghetti's appearance is atually giving a degree of confidence, even when the news is bad.


AT