Sydney Airport is looking at returning more to unitholders this year because of an expected modest improvement in traffic, but Virgin reckons its results will fall because of problems with a reservations system.
As a result Sydney Airport units hit a new high and Virgin shares lost ground, dropping 15% by the close.
Sydney Airport yesterday raised its forecast distributions for this year on hopes of increased traffic from foreign budget airlines such as Scoot, and the impact of alliances such as the partnership between Qantas and Emirates and Virgin Australia and its Middle Eastern partner Etihad.
At its annual meeting in Sydney, the company said distributions for 2013 would reach 22.5c a unit, up from the 21c in 2012.
Sydney Airport said its total passenger traffic for the first four months of this year was up 3.2% on the same period in 2012.
But the news at Virgin saw the shares dip more than 7c to 39c, on the unquantified fall in earnings for the year to June 30. the shares were down 3c in the morning, but lost more ground in afternoon trading.
Sydney Airport makes money, Virgin struggles
The airline issued the downgrade on Wednesday night, shortly after a board meeting in Sydney.
Virgin said its underlying pre-tax profits this financial year would be less than in 2011-12 when it reported $82.5 million in underlying profits before tax.
That was after it had earlier forecast an improved profit for the year to June.
The airline said it was experiencing lower revenue because sales lost with the overhaul of the reservations system earlier this year would not be able to be recovered in the fourth quarter.
In January the airline replaced its troublesome Navitaire reservations system with one operated by Sabre, which resulted in the airline having to scale back services while the changeover occurred.
Virgin directors said it was unable to provide more definitive guidance for this year because of "the slower trading conditions and the competitive and weakening economic environment".
The downgrade has damaged the squeaky clean image Virgin and its management have had for the past year as Qantas has struggled. Now more investors will lump Virgin into the same basket as Qantas.
But watch out for Virgin shares to be supported in the market for a while – there are suggestion that Etihad could be topping up its holding to rebuild its stake to 9.9% after it was diluted by the issue of shares to Singapore Airlines.
Shares in the travel business, Flight Centre jumped 2.8%, or $1.13, to $40.73. That was after a 90c rise (more than 2%) on Wednesday to take the two gain to around 5%.
Virgin Trading and Market Update
