Virgin Blue has slashed its net profit before tax outlook for the 2010 financial year, saying it will come in between $20 and $40 million, a major revision to the previous guidance of $80 million.
“Since the guidance given earlier this month, we have continued to see rapid deterioration and increased volatility in the operating environment, particularly in respect of the leisure segment both domestically and internationally,” the company told the Australian Securities Exchange in a statement. “This is consistent with the weakening trend seen recently in the broader retail market as well as an unexpected and sudden decline in consumer confidence in the last month. The decline in demand has coincided with a period of increased industry capacity.”
The company added that its average fares have decreased by 10 per cent, severely impacting yields. Nevertheless, it expects the short haul business to record a net profit before tax and exceptional items in the order of $100 million, possibly indicating that it expects V Australia to be in a net loss position at the end of the financial year.
“The company will continue to monitor market conditions and, should these prevail, we have flexibility to adjust capacity through lease returns. However, we remain focussed on defending our core strategic routes,” said the airline.
