Good news ... Virgin Australia has put its worst financial result on record firmly behind it, with a surge back into the black. Picture: Brendon Thorne/Bloomberg Source: Supplied
FREE snacks for passengers, flash new business suites and the best on time performance in the country has helped Virgin Australia pull off a $93 million turnaround.
Led by former Qantas executive John Borghetti, the airline has today posted a second quarter underlying profit of $55.3 million.
The result represents a $47.6 million improvement on the previous corresponding period, and adds up to a half-year underlying profit of $10.3 million for the Australian carrier.
IN THE RED: Virgin Australia's $83.7M half-year loss
Improvement achieved ... Virgin Australia CFO Sankar Narayan said a $7 million saving in fuel costs had assisted with the improved result. Picture: News Corp Australia Source: News Corp Australia
It is a major turnaround for the airline which was $83 million in the red at the same time last year, and went on to post a full year underlying loss of $211 million.
As part of the transformation of Virgin, Mr Borghetti has overseen a partial move towards a “full service” carrier with passengers now getting free snacks and tea, coffee or water.
He also unveiled flash new business class suites last year as part of a cabin reconfiguration designed to boost yields.
More details of the airline’s half-year results will be announced on February 19.
Virgin Australia Group Chief Financial Officer Sankar Narayan said a “small” $7 million saving in fuel costs had also assisted with the improved result.
On the increase ... Virgin Australia soaring back into the black. Picture: Supplied Source: Supplied
“We are delivering on our plan to maintain our cost advantage through the disciplined execution of our cost reduction program while continuing to drive revenue growth from the corporate, government and charter market segments,” said Mr Narayan.
“The cost reduction benefits are being realised while we continue to improve the customer experience.”
He said they were seeing some improvement in domestic trading conditions compared with the first quarter, but consumer sentiment had been relatively weak.
“International yield recovery has been constrained by continued pressure in the South East Asian and Europe/United Kingdom markets,” Mr Narayan said.
Virgin Australia also announced its acquisition of the remaining 40 per cent of shares in Tiger Airways, giving the airline full ownership and control of the budget carrier.
Looking good ... Virgin Australia CEO John Borghetti with staff is surely smiling after these new figures. Picture: Supplied. Source: News Corp Australia
Virgin paid just $1 for the remaining stake in Tiger, after shelling out $35 million for the other 60 per cent.
As part of the deal, Virgin Australia has secured the brand rights to fly Tigerair to a number of short haul international destinations.
“The completion of this acquisition marks the next phase of Tigerair Australia’s evolution in the Australian market and represents an important step in its pathway to sustainable profitability,” said Mr Narayan.
“We remain focused on maintaining Tigerair Australia’s low cost business model and a separate brand while ensuring there is a viable low cost alternative in the market for consumers.”
Qantas is expected to announce an underlying profit of between $300 and $350 million for the first half of 2014-15, on February 26.
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