Virgin Australia reveals huge cost of Bali volcanic eruptions

International News, National News

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BALI’S volcanic eruptions — which forced Australian carriers to cancel hundreds of flights in and out of Denpasar — blew a $19.2 million hole in Virgin Australia’s half-year profits.

The carrier has today posted a $81.5 million before-tax profit for July-December 2015, an improvement of $71.2 million on the same time last year — and an after tax profit of $62.5 million, representing a $110 million turnaround.

But the airline noted the cost of the Bali volcanic activity to Virgin Australia’s international arm, which remains on track to return to profitability by the end of the 2017 financial year.

The plunging fuel price delivered a $33.8 million benefit for the carrier compared with the previous corresponding period, but budget airline Tigerair is emerging as the real star for owner Virgin.

In the six-month period, Tigerair achieved yield growth of 12 per cent and recorded its highest half year underlying earnings before interest and taxes (EBIT) of $13.9 million since commencing operations.

Virgin Australia Group CEO John Borghetti said 2016 would be even bigger for Tigerair, with the carrier to begin international flights from Melbourne, Adelaide and Perth to Bali next month.

“Tigerair Australia has already seen a strong take-up in forward bookings for these flights,” Mr Borghetti said.

Virgin Australia Domestic also continued to perform strongly, as a result of attracting more corporate and government travellers.

“Delivering this type of performance isn’t possible without the hard work of our people,” said Mr Borghetti.

“I would like to thank every one of our team for their ongoing commitment to delivering our strategy.”

He said customers had voiced “their strong support for new initiatives launched during the half” including the refurbished A330 business cabins.

Mr Borghetti also revealed plans to further “optimise Virgin Australia’s fleet” with the sale of five Embraer 190s, and the sale of six Embraer 170s currently subleased to codeshare partner Delta Air Lines.

The sales, and a further benefit from the low fuel price would help the Group “report a profit for the 2016 year”.

“The Group’s operational and financial performance continues to show strong momentum across all business units,” said Mr Borghetti.

“The Group is improving its revenue and customer offering in all segments of the aviation market. At the same time, the Group is maintaining strict cost discipline while optimising the balance sheet.”