Virgin Australia chief executive John Borghetti says he is encouraged by the airline’s trading performance so far in 2011/12, with profits to date up from the prior year despite higher fuel costs.
In an update to shareholders at the company’s annual general meeting (AGM) in Brisbane on Wednesday, Virgin said underlying profit before tax for the first three months of 2011/12 had been higher than the prior corresponding period.
While stopping short of providing specific earnings guidance due to the uncertain economic environment, Mr Borghetti said the airline group was expecting an “improvement in underlying performance” this financial year.
The Virgin chief executive, who marked 18 months in the top job earlier this month, said the financial numbers showed the group’s strategy of improving yields – or average airfares per passenger – and seeking more corporate travellers was correct.
“We are building significant momentum in this strategy and we have now laid the foundations for future growth,” Mr Borghetti told shareholders.
The improvement came not only despite higher fuel costs, but was achieved in what Virgin chairman Neil Chatfield described as a challenging environment.
Virgin reported a 2010/11 first half net profit of $23.8 million, but a difficult second half sent Australia’s number two carrier tumbling to a full year loss of $67.8 million.
Mr Borghetti said the airline had poured about five per cent more capacity into the Australian domestic market so far during the first half, in the middle of the target range announced at its full year results presentation in August.
The airline did not offer capacity forecasts for the second half, Mr Borghetti said, as “we want to leave ourselves flexibility to adjust capacity as market demand occurs.”
Although Virgin was due to receive about one Boeing 737 a month throughout calendar 2012, Mr Borghetti said the new aircraft could be used to either replace older aircraft or add capacity.
“We are not out there for a market share race,” Mr Borghetti told reporters after the AGM.
Separately, Virgin said it was changing its reservations and booking system to Sabre, with the migration expected to be fully completed by March 2013.
Currently, Virgin’s domestic and regional operation uses the Navitaire booking system, while its long-haul carrier V Australia operates with Amadeus.
The move to bring the entire airline group under Sabre was designed to forge closer integration with Virgin’s alliance partners, and help offer better recognition of frequent flyers.
“We will be one airline, with one name and one reservation system,” he said.
Virgin has formed partnerships with Etihad Airways, Air New Zealand and Delta Air Lines, and was waiting for final approval for a tie-up with Singapore Airlines.
Mr Borghetti said the airline would have 250 new cabin crew roles based mainly in NSW by late January to support the new capacity increases and provide greater operational flexibility.
Virgin shares closed down half a cent at 36.5 cents.
