More red ink from the Australian aviation sector with news of a much larger loss for the private-equity-controlled Virgin Australia in the year to June.
Virgin yesterday revealed that its losses jumped sharply in 2021-22, despite the late improvement in travel in the final months of financial year.
The carrier’s underlying loss increased more than fivefold to $386.7 million in the year to June 30, from $76.8 million in the previous year, according to financial results lodged with the Australian Securities and Investments Commission.
The loss compares to the underlying EBITDA claimed by Qantas in the year to June of $281 million following a $526 million EBITDA rebound in six months to June.
Virgin’s revenue jumped 45% to $2.2 billion, as the easing of border restrictions boosted travel towards the end of the financial year.
But like Qantas, the higher inflow of cash was not enough to offset staff costs and the surge in fuel costs as global oil prices rose from February onwards with the Russian invasion of Ukraine.
That saw Virgin – which is owned by US PE group Bain – report a statutory loss of $565.5 million, roughly half Qantas’ statutory loss before tax of $1.1 billion.
Smaller rival Rex lost $68 million.
Virgin and Bain are said to be looking at a return to a stockmarket listing in 2023, but the problems in aviation and high fuel prices might make that problematic, at least in the first half of next year.
While Virgin credited the resurgent demand for travel to the reopening of domestic and international borders, high vaccination rates and Australia’s new attitude towards “living with Covid”, directors admitted the company’s operational performance had not kept pace with the rapid rebound in domestic travel.
“Over Easter, Virgin Australia recorded its busiest travel period since before the pandemic, with Easter Monday a milestone day for Virgin Australia, with the highest number of daily passengers flying since before the pandemic,” they said in the report.
“However, similar to most airlines globally, Virgin Australia also encountered operational resilience issues – largely attributable to ongoing team member illness – resulting in material network disruption in the fourth quarter and requiring Virgin Australia to take proactive measures to reduce flying capacity in the short term.”
“Our workforce has grown to more than 7,000 strong and since the July school holidays, we have employed over 500 people in key operational roles as well as making rostering adjustments which will support the busy period,” a Virgin spokesperson said, explaining that the company had hired more pilots, cabin crew and baggage handlers to meet demand.
Since re-launching in November 2020, Virgin has grown its fleet of Boeing 737 jets from 55 aircraft to 88, with 77 in operation before the end of the financial year.
And there will be no letup in fare rises according to the airline’s CEO, Jane Hrdlicka who told an aviation conference in Adelaide on Wednesday that “inflation is coming at us faster than we can bail water out”.
She says more cost cuts will be needed and travellers will have to continue to pay more in air fares.
She also made it clear that returning to international travel remains a pipe dream at the moment.
Directors reaffirmed Virgin’s growth strategy remained focused on obtaining a 33% share of the domestic travel market and flagged the airline may consider adding long-haul international travel at some point in the future.
The CEO said the airline was reluctant to resume long-haul services even as demand for international travel rebounds strongly.
“Anything that we did from a long-haul standpoint would have a very high hurdle on it,” Hrdlicka said in an interview with Bloomberg.
