All you need to know about the Virgin Australia FY2017 results

Virgin Australia Group released its 2017 financial year results today. This included information on its subsidiary, Tigerair, Velocity Frequent Flyer programme, and outlook for FY2018. Blue Swan has pulled together all the key highlights from the results into an easy to read snapshot for your reference.

Results:

Virgin Australia reported the following financial highlights for 12 months ended 30-Jun-2017:

  • Revenue: AUD5047 million (USD3804 million), +0.5% year-on-year;
    • Airline passenger: AUD4275 million (USD3222 million), +1.9%;
    • Other ancillary: AUD765.3 million (USD576.8 million), -3.2%
  • Operating costs: AUD5171 million (USD3898 million), -2.0%;
    • Labour: AUD1219 million (USD918.9 million), +5.3%;
    • Fuel: AUD1024 million (USD771.6 million), +4.0%;
  • Profit (loss) before net finance costs and tax: (AUD121.8 million) (USD91.8 million), compared to a loss of AUD257 million (USD187.2 million) in p-c-p;
  • Net profit (loss): (AUD185.8 million) (USD140 million) , compared to a loss of AUD224.7 million (USD163.6 million) in p-c-p;
  • Total assets: AUD6356 million (USD4791 million);
  • Cash and cash equivalents: AUD1396 million (USD1052 million);
  • Total liabilities: AUD4782 million (USD3604 million).

*Based on the average conversion rate at AUD1 = USD0.753705 for FY2017
*Based on the average conversion rate at AUD1 = USD0.72825 for FY2016

Virgin Australia CEO: Group maintained strong focus on improving balance sheet in FY2017

Virgin Australia Group CEO John Borghetti commented on the Group’s FY2017 Financial Results, stating: “Throughout FY2017, the Virgin Australia Group maintained a strong focus on improving its balance sheet which is yielding positive results. We reported the first positive free cash flow result since FY2012 and the Group’s highest reported cash balance as at 30-Jun-2017. We have also delivered a 40% improvement in Financial Leverage compared to the end of FY2014 following an AUD839 million (USD662 million) reduction in Net Debt.”

Virgin Australia domestic results

Virgin Australia commented on its domestic performance for FY2017, stating demand required sectors flown to be reduced by 5.9% year-on-year. The decline was a result of subdued trading conditions including reduced demand for regional travel and for corporate travel.

Virgin Australia confirmed the Group’s underlying performance for FY2017 was affected by subdued domestic trading conditions and the impact of fleet simplification. Statutory results were impacted by restructuring charges predominantly from the Better Business programme and upfront costs associated with implementing the programme.

Virgin Australia International profitable in FY2017

Virgin Australia International announced a FY2017 profit an AUD49.3 million (USD38.9 million) improvement in Underlying EBIT year-on-year, as well as yield and RASK growth. Virgin Australia stated the positive outcomes are a result of the international improvement strategy the Group commenced two years ago.

Virgin Australia Velocity programme exceeds expectations

Virgin Australia announced FY2017 financial results for its Velocity programme. Velocity’s Underlying EBIT performance improved 2.2% year-on-year, membership reached eight million members by 30-Jun-2017 and revenue was AUD371 million (USD292.9 million), a 13.2% increase year-on-year. Virgin Australia stated: “Velocity continued on its growth trajectory, significantly exceeding its FY2017 membership target to reach over eight million members. Velocity improved its underlying profitability and forged a number of important new partnerships, including deals with Flybuys, Energy Australia and Bupa”.

Virgin Australia update on Better Business programme

Virgin Australia provided an update on its Better Business programme implementation for the FY2017. This included:

  • 5% reduction in operating fleet with capacity maintained through improved utilisation of aircraft;
  • The sale of 10 E190 aircraft and lease return of two E190 aircraft;
  • A wind down of E190 operations;
  • A reduction of ATR operations;
  • Renegotiation of a number of Boeing 737 leases;
  • Optimisation of domestic and international routes, including exit of loss making Abu Dhabi route.

Virgin Australia outlook for FY2018

Virgin Australia delivered its outlook for FY2018 believing positive momentum seen in Q4FY2018 will continue and underlying performance for Q1FY2018 will improve year-on-year. The Group also expects the Better Business programme to continue to track ahead of schedule in implementation and balance sheet improvements to be delivered.

 

Tigerair Australia

Significant decrease in profits

Tigerair Australia reported an Underlying EBIT loss of AUD24.3 million (USD19.2 million), representing a decline of AUD26.5 million (USD21 million) year-on year. Virgin Australia stated: “Tigerair Australia’s domestic operations were profitable, with the business delivering passenger and unit revenue growth, however Tigerair’s overall underlying performance, including international operations, were impacted by the launch and withdrawal of operations to Denpasar”.

Growth in passengers carried

Tigerair Australia reported 10.7% year-on-year growth in passengers carried and 3.6% in RASKs in FY2017. Virgin Australia stated: “Tigerair’s capacity growth over the year was driven by operations to Denpasar and the comparative impact of the addition of fourteen A320 aircraft”.