Virgin looks to China
Virgin Australia’s push into China comes as it faces continuing tough conditions at home, with profits down 48% in the first half of the financial year and plans for new aircraft pushed back to late 2019. The carrier last month revealed details of the first stage in its proposed alliance with its Chinese stakeholder HNA Aviation, announcing direct fights to Hong Kong and codeshare services with several of its China-based cousins. While it hasn’t revealed which Australian cities it will depart from, the airline says it will introduce Hong Kong flights by the middle of this year. Its plans are subject to approval, but involve connecting with mainland Chinese cities via codeshare services with Hong Kong Airlines, Hainan Airlines and other HNA Aviation carriers. In return, HNA airlines will boost access to Australian markets with codeshares on Virgin’s domestic services and to New Zealand via its trans-tasman flights. “This new alliance will be a game changer for travel between Australia and China, providing significantly more competition and choice for travellers,” Virgin Australia CEO John Borghetti said. “The alliance will accelerate and support our access to the Chinese market, which is Australia’s fastest growing and most valuable inbound travel market,” he said. Borghetti positioned the alliance as a key plank in the airline’s international strategy, which was among the most upbeat areas in Virgin’s half-year results announced at the same time. The international arm posted a profit of $800,000 in the six months to 31 December, a turnaround from the underlying EBIT loss of $30.8 million in the previous first half. The group also reported its highest total cash balance of almost $1.6 billion and achieved a debt reduction of $936.3 million. But overall the group’s performance was weighed down by “ongoing subdued trading conditions in the domestic market”. Underlying profit before tax was down 48% to $42.3 million, a $39.2 million decline on the same period last year. Group revenues were down 9% to $2.6 billion. The airline is addressing the domestic malaise by managing capacity, reducing sectors flown by 4.7%. It has also deferred delivery of the first of its Boeing 737MAX aircraft from next year until late 2019, a move that allows it to delay $350 million in capital expenditure. Qantas had yet to announce its half yearly results at the time travelbulletin went to press, but in October warned that it too had been battling sluggish conditions domestically.