Virgin Australia says it is the genie out of the bottle
First half financials show there is no stopping Virgin Australia says CEO John Borghetti even though it could not resort to $125 million in Dreamliner compensation from Boeing to paper over the damage done by a fare and capacity war with Qantas
Virgin Australia CEO John Borghetti kicked off this morning’s first half FY13 briefing by declaring that the results proved that “the genie is out of the bottle”.
Borghetti said the airline had become sustainably profitable in the face of adversity caused by the capacity and fare contest with Qantas, even though its statutory profit after tax for the six months dropped to $23 million from $52 million and its underlying profit before tax of $61 million was a drop of $35 million from the $96 million reported in the corresponding first half for FY12.
He said “We have seen the biggest competitive response in Australia in terms of additional capacity since 2004 and if this had happened 18 to 24 months ago we wouldn’t be standing here talking about a profit today.”
(2004 was the year Jetstar began services as the Qantas second brand low cost carrier that would stop Virgin Blue. It can be fairly said to have curbed Virgin Blue’s expansion while driving to it customers vowing never to fly Jetstar again.)
Borghetti said that factors which impinged on its first half FY13 results included carbon tax payments of $24.4 million which were not recovered from its customers because of lower yields caused by the intense fare competition in the six months and a $6 million effect by the Qantas industrial action.
The publicly available figures allow a comparison of the Qantas Group first half FY13 figures adjusted for the one-off benefits of the Boeing 787 compensation payment of $125 million compared to those of Virgin Australia adjusted for the one-off impact on it of the Qantas industrial dispute.
This is how the Qantas Group was helped by the Boeing compensation:
This is how the Virgin Group was affected by the Qantas industrial dispute:
These figures show that if Qantas hadn’t received the Dreamliner compensation its underlying PBT would have been $98 million in the six months to 31 December 2012, not the reported $223 million, or a decline of -74.9% rather than a rise of 10.4% compared to the same period in FY12.
All of which suggests that the first six months of this financial year has been tough in the real game of winning passengers and getting profitable yields from the fares sold, but that neither side is showing any sign of succumbing to their wounds.