No hiding place for Virgin Blue
BRISBANE – What was Virgin Blue trying to hide yesterday when it sent out a media release about its latest financial results without a subject line to the email broadcast.
Maybe the subject line should have read, “Virgin Blue announces net loss of A$101.4 millionâ€.
Instead, the release, not surprisingly, focussed on the positives. “Virgin Blue Holdings Limited today reported an underlying net profit before tax of $60 million for the six months to 31 December 2008,†it trumpeted.
Analysts noted that Virgin Blue is focused on cutting costs and hoarding cash for the tough times ahead, after investment and hedging charges caused the budget airline to report a first half loss.
Said CEO Brett Godfrey, “We’ve decided that it would be wiser and safer to sort of batten down the hatches, so to speak and look at this as a two year downturn.
“Now, we’re not saying that that’s the case. And we’ve seen a lot of good indicators, particularly what’s we believe some of the initiatives put forward by the Federal Government that perhaps that won’t be the case.
“But I think it’s wiser at this juncture to plan for it at least.â€
The airline reported a net loss of A$101.4 million (US$65.16m) for the six months to December 31, 2008 compared with a profit of A$113.3 million for the same period the year before.
The company took an after-tax charge of A$60.6 million for its investment in trans-Pacific subsidiary V Australia, which included unrealised foreign exchange losses, and an A$80.8 million expense for the mark to market of ineffective fuel and currency hedges.
V Australia launches this week and Godfrey concedes that while the timing may not be good, the airline’s plunge into Pacific services to the US west coast is a long-term investment.
The Virgin Blue result reveals the extent of the challenges facing airlines Down Under.
Last week Qantas was downgraded by Moody’s Investors Service, with the ratings agency expressing concerns about the Australian carrier’s debt, falling profits and cash flow.
Next up, Air New Zealand Limited will release its FY09 interim result for the six months to 31 December 2008 on Thursday.
Don’t expect the numbers to be pretty.
Ian Jarrett
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