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Saturday 25

February, 201711:01 AM



Virgin hurting from soft market conditions

Virgin hurting from soft market conditions

Virgin Australia, hurt by soft passenger demand and restructuring costs, books a net loss of $36.1 million for the six months to December 31.

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By AAP 17.02.2017 11:28 AM

Virgin Australia's financial performance has been whacked by leisure and corporate travellers tightening their belts.

Australia's second biggest airline has swung to a net loss of $36.1 million for the six months to December 31, hurt by weak passenger demand and restructuring charges relating mainly to fleet changes.

That compares to a net profit of $45.7 million over the same period a year earlier.

Chief executive John Borghetti blamed concerns about the economy, rising house prices and a mixed jobs market for the soft demand.

"There is a sense of uncertainty, there is a sense of conservatism."

"I think people, generally, whether it's corporates or leisure, are just a little bit more cautious with their spending in travel," Mr Borghetti told journalists on the group's earnings call on Friday.

Australia's unemployment rate fell to 5.7 per cent in January from 5.8 per cent in December, but full-time work fell and income growth slowed, according to the latest figures from the Australian Bureau of Statistics on Thursday.

Mr Borghetti doesn't expect industry conditions to improve any time soon.

"I hope they turn around tomorrow, but you know I think its hard to see a turnaround tomorrow. I think we're in an environment that may take a little while," he said.

Virgin did not provide any outlook guidance due to "uncertainty in external market conditions".

First-half underlying profit before tax dropped sharply to $42.3 million, from $81.5 million a year ago, with revenue down 0.9 per cent at $2.63 billion.

As part of its previously announced restructuring plans, Virgin has cut jobs and the number of aircraft types it operates.

Virgin on Friday disclosed that it has agreed to sell six of its remaining Embraer 190 aircraft for an undisclosed sum, and that delivery of its first Boeing 737MAX aircraft has been delayed by about 12 months until the fourth quarter of 2019.

Virgin also announced that it plans to start flying to Hong Kong from mid-2017 as part of its alliance agreement with HNA Aviation, Hong Kong Airlines and HK Express, subject to approval by HK's competition watchdog.

VIRGIN SWINGS TO NET LOSS

*Airline swings to net loss of $36.1m, from $45.7m profit

*Revenue fell 0.9pct to $2.63b

*Virgin didn't declare an interim dividend

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