Virgin eyes FY16 return to profit

Virgin chief executive John Borghetti described as “misinformation” suggestions that the gap with Qantas had closed in on just 5 per cent. “The important thing is looking at the facts”, he said on Friday, adding that the only pressure on executives to return to profitability was from themselves and not its largest shareholders.

No matter how the numbers are diced Tigerair Australia will have 30 economy seats on those 737 flights that will exceed the number of extra space seats in any other single aisle cabin flown by an Australian airline at home or overseas.

The carrier will save about A$162 million from its fuel bill next year, Virgin Australia said, with the benefit shaved to A$63 million thanks to the adverse effects of a weaker Australian dollar. It narrowed its statutory net loss to A$93.8 million from A$353.8 million a year earlier, and booked about A$60 million in savings from the decline in oil prices.

“Over the past financial year, the group’s return on invested capital has increased from 1.4 to 6.1 per cent”, he said.

Virgin Australia Holdings Ltd said it would return to profit by next June for the first time in four years, counting on a switch of long-haul routes to its low-cost Tigerair subsidiary to reverse global losses.

As part of the overhaul, Virgin said it would redeploy the Boeing 737 aircraft it has used for flying to Bali and Phuket to trans-Tasman routes including Sydney to Christchurch and Melbourne-Christchurch.

The airline’s worldwide division made an underlying loss of $68.3 million in 2014/15, offsetting a turnaround in its domestic operations and dragging the group into the red again. In recent months it has introduced business class on the Tasman and Pacific routes and integrated management of its New Zealand operations into the rest of the worldwide business.

Virgin said it was ahead of schedule on its cost saving goal of $1bn by the end of fiscal 2017.

“Improving our return on invested capital will continue to remain a strong focus for the group”.

Tiger Airlines is going to be available between Melbourne and Adelaide, Bali and Perth at cheaper rates, announced its parent company Virgin Australia.

Rival Qantas Airways is forecast to report a A$960 million underlying pretax profit for the 2014-2015 year, following a successful cost-cutting programme, when its annual results are released on Aug.20.

The ASX listed shares last traded at 44 Australian cents, and have increased 4.8 percent this year.