ATW Daily News

Virgin Blue's full-year profit drops 54.7%

Wednesday August 20, 2008

Virgin Blue Holdings blamed soaring fuel prices and one-off product enhancement costs for its 54.7% drop in net profit to A$97.7 million ($85.1 million) for the fiscal year ended June 30.

The result was slightly ahead of market expectations but management advised that the year ahead will be tough, although it still expects a positive result.

The underlying net profit was A$140.5 million but the costs associated with the launch of V Australia, domestic services in New Zealand, the introduction of Embraer jet aircraft, expansion of The Lounge product and launch of Premium Economy in Australia absorbed A$42.8 million.

Revenue increased 8.4% year-over-year to A$2.35 billion with yield rising 0.2% to 11.59 cents. Capacity was ahead 7.9% to 23.3 billion ASKs while RPKs grew 6.8% to 18.8 billion. Load factor slipped 0.7 point to 80.5% and passenger numbers climbed 9.2% to 16.7 million. Operating costs jumped 18.5% to A$2.18 billion, reflecting the surge in fuel prices, with Blue's average price per barrel rising 17%. Unit cost subsequently climbed 6.1% to 9.05 cents.

CEO Brett Godfrey told media in Sydney: "With fuel costs at never before seen record highs for much of the year and airlines around the world struggling to cope, this result is a testament to our team and business model." He added that Blue has "implemented a range of measures in recent months to mitigate the impact of increased fuel costs and we will continue to closely monitor the operating environment and take whatever actions are necessary to see our way through what is expected to be a challenging period." In light of the difficult trading condition, the company scrapped its final dividend payment for FY08 and FY09 dividends are in doubt.

Godfrey said V Australia remains on track for a December launch. Virgin Blue plans to invest a further A$55-A$65 million in the operation, in line with previous guidance.

by Geoffrey Thomas

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