Virgin Australia Q3 Profit Up, But Cuts Capacity

May 1, 2016

Virgin Australia announced underlying pre-tax profit rose 16.2 percent to AUD$18.6 million (USD$14.17 million) in the three months to March 31, but warned it will cut its June quarter capacity by 5.1 percent due to weak demand combined with uncertainty about the Australian Federal election.

For Virgin, the disclosure adds to a sense of instability since its biggest shareholder, Air New Zealand has said it may sell its 26 percent stake.

The warning comes two weeks after larger domestic rival Qantas said it was cutting domestic capacity due to softer demand, also citing uncertainty about the Federal election expected to be held on July 2.

Virgin also said this year that it plans to tap its four largest shareholders, including Air New Zealand, for a AUD$425 million loan, stoking concerns that a turnaround it is currently undergoing may be taking longer than hoped.

In its statement, Virgin said it expects to post a pre-tax underlying profit of between AUD$30 million and AUD$60 million in the year to June 30, in keeping with its previous guidance of returning to profitability this year following two previous years of net losses.

Virgin and Qantas have been benefiting from a dip in the oil price as they emerge from a years-long price war which led to hefty losses.

(Reuters)