Virgin Australia has posted a $69.0 million loss after tax for the third quarter of the 2017 financial year, pushing its losses after tax for the nine months to March 31 to $90.6 million.
The underlying loss before tax, meanwhile, was $62.3 million for the quarter and $20.2 million for the nine months, the airline group reported in a trading update to the ASX on Thursday.
Noting the third quarter is “historically” the weakest of the financial year, Virgin Australia said the result also reflects costs from its fleet simplification program, foreign exchange movements, subdued domestic market conditions, the withdrawal of Tigerair Australia from Bali and severe weather events in Queensland in March.
The weakness in the domestic and international markets is illustrated by the provisional quarterly operating statistics released with the trading update. For the third quarter group revenue passenger numbers were down one per cent compared to the third quarter of the 2016 financial year. Within that figure Virgin Australia domestic revenue passengers were down 0.4 per cent for the quarter while international revenue passengers fell 13.1 per cent. Tigerair Australia, meanwhile, saw 4.5 per cent growth in revenue passenger numbers for the quarter.
Another positive for Virgin Australia in the quarter was the continued improvement in its net debt position. The company said Group debt was reduced by over $200 million in the quarter. In all, together with accelerated debt repayments, the Virgin Australia Group’s net debt has been cut by a third, or $627 million as at March 31 when compared to June 30 2016.
Part of that debt reduction has come from the phased withdrawal of its Embraer 190 fleet, which has comprised a combination of leased and owned aircraft. In the trading update Virgin Australia said two of its six owned E190s had been sold subsequent to March 31, while the remaining four owned aircraft are contracted to be sold by June 30. All remaining E190s are due to be withdrawn from service by the end of the 2017 calendar year.
Virgin Australia is also rationalising its fleet through the disposal of all six ATR 72-500 and two ATR 72-600 turboprops, leaving just six ATR 72-600s in service. That will also allow the closure of the Brisbane ATR crew base.
The airline said the “adverse cost impact” of the E190 and ATR fleet rationalisations “will be reduced over the next 12 months as the removal of those sub-fleets progresses”.
Looking ahead Virgin Australia said based on current market conditions it expects its underlying result for the fourth quarter will “improve” on the fourth quarter of the 2016 financial year.
