Home comfort for Virgin

Rise in domestic bookings boost airline’s revenue

AUSSIES are booking more domestic flights, helping Virgin Australia rake in greater revenue despite a whack from higher jet fuel prices, the airline has revealed.

Australia’s second-biggest airline yesterday said it expected its half-year profit to rise 22 per cent compared to the same period a year ago.

Underlying profit before tax for the six months to June is expected to hit at least $100 million, Virgin said yesterday.

That is up from $81.9 million last year.

The underlying measure strips out one-offs such as asset sales or write-downs.

Virgin said the forecasted rise is inclusive of an estimated year-on-year fuel price increase of $88 million.

Revenue for the three months to December is tipped to rise 10 per cent compared to the prior corresponding quarter.

Revenue for the three months to September rose 9.7 per cent on the prior corresponding quarter, well above Virgin’s 7 per cent forecast. The airline posted an underlying profit before tax of $109.6 million for the 2017-18 financial year.

But it still made a sixth consecutive statutory loss of $681 million after impairments and tax adjustments.

Fears have been mounting over the impact of rising fuel prices and a lower Australian dollar for the nation’s domestic airlines.

Virgin shares have fallen 9 per cent since July while Qantas is off 15 per cent over the same period.

In July, Virgin Australia chief John Borghetti (pictured) said rising fuel costs were putting pressure on airlines to raise airfares.

Mr Borghetti told media the airline hedged for fuel prices but “hedging runs out at some point”.

In August, Qantas Airways chief executive Alan Joyce said his airline would cut costs to offset fuel prices.

Last year, Virgin’s statutory profit was hit by a $120 million impairment of its international business assets and deferred tax accounting write-offs for $451.9 million. Virgin Australia’s international business was buffeted by higher fuel prices, Bali’s volcanic activity in late 2017 and its investment in Hong Kong services.

Last month Virgin revealed Mr Borghetti took a $2.5 million annual pay cut after failing to hit key performance targets.

Mr Borghetti, who has announced he will leave the airline by January 2020, pocketed $4.01 million in pay and perks for the 2018 financial year. That is down from $6.5 million in the prior year.