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VB posts strong first half results, flags 737 buy

written by WOFA | February 24, 2010

VB is looking to acquire "up to" 50 new 737s. (Paul  Sadler)
VB is looking to acquire "up to" 50 additional 737s. (Paul Sadler)

Virgin Blue Holdings has today reported a net profit after tax of $62.5 million for the six months ending December 31 2009 (compared to a $101.4 million loss in the first half of the previous financial year), and further detailed plans to acquire up to 50 new Boeing 737s for extra domestic capacity.

Highlights of the result include:

* Underlying profit before tax of $75.6 million, up 34 per cent.

* Revenue up 12.2 per cent to $1.51 billion.

* Cost per available seat kilometre, excluding fuel, down 4.5 per cent.

* Group ASKs up 24.7 per cent to 16.4 billion.

“Any way you cut it, to continue to achieve cost reductions while we continue to grow our business and position it to rapidly and fully exploit any improvement in economic conditions demonstrates the remarkable commitment of each and every one of our team members and the resilience of our model,” said CEO Brett Godfrey.


Nevertheless, Godfrey added that the operating environment and pace of the global recovery were uncertain, while increased price competition will put pressure on yields for the remainder of the year.

“However, we do not intend to shy away from remaining competitive, and we plan to vigorously defend our core domestic markets. In that regard we are intending to secure additional short term domestic capacity and have reached an in principle agreement with Boeing for an order of up to 50 aircraft. These aircraft will come equipped with the upgraded Boeing Sky Interiors as well as performance improvements that will deliver significant fuel and maintenance efficiencies.”

The short haul business of Virgin Blue and Pacific Blue recorded a profit before tax of $108 million (up 126 per cent) on revenues of $1.26 billion (up 3.5 per cent). Australian domestic yield grew 2.7 per cent, with  4.9 per cent of domestic capacity redeployed to short haul international routes (short haul international yields were down by 4.3 per cent). Domestic load factor increased 1.3 points to 82.9 per cent.

V Australia posted a loss before tax of $39 million, but the company says V is meeting expectations with a noticeable improvement expected in the second half, with guidance that V would be profitable within 18 months of launch remaining “valid”.

V Australia is also expected to benefit from its joint venture on Pacific routes with Delta Air Lines, which received ACCC approval last year. Currently, the two airlines are awaiting approval from the US Department of Transport before beginning their joint operations, which will see them coordinate on schedules, fares, product and networks between the US and South West Pacific.

In its outlook, the company says that it expects to record a full year profit before tax excluding ineffective cash flow hedges and non designated derivatives of between $80-$110 million, although it still expects that seasonality and competition will keep yields down.

Virgin Blue chairman Neil Chatfield also noted that efforts to find a successor CEO to the retiring Godfrey are continuing. “At the present time, the Board is working with a shortlist of candidates and expects to further update the market in the near future.”


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