You are using an older browser version. Please use a supported version for the best MSN experience.

Virgin swings to loss in tough market

AAP logoAAP 1/11/2016 Lilly Vitorovich

Virgin Australia has joined rival Qantas in announcing a tough start to the year, with soft demand pushing the number two carrier to a first-quarter loss.

Australia's second-biggest airline has booked a net loss of $34.6 million for the three months to September 30, hurt by a weak domestic market and restructuring charges.

That compares to a net profit of $1.7 million for the same three-month period a year earlier.

The Brisbane-based carrier also booked an underlying pre-tax loss of $3.6 million for the quarter, down against an $8.5 million profit a year earlier.

"This result was impacted by subdued industry trading conditions during the quarter, particularly in the domestic market, which affected revenue," Virgin said on Wednesday.

In a lower Australian share market, Virgin shares were down one cent to 23 cents at 1143 AEDT.

Virgin says its restructuring program - which was unveiled in June - is already generating savings in 2016/17, and has flagged that net free cash flow savings will increase to $300 million annually by the end of 2018/19.

As part of its overhaul, Virgin is cutting jobs, streamlining its aircraft fleet and slashing debt. Virgin, like Qantas, is hoping to grab a share of the burgeoning Chinese travel market by increasing flights to China and Asia.

Qantas - which has gone through a major cost-cutting and restructuring program that saw thousands of jobs axed - warned on Monday that its new financial year has got off to a tough start as airlines cut air fares to stimulate demand.

The airline warned underlying profit before tax may fall as much as 13 per cent to between $800 million and $850 million for the six months to December 31, from a record $921 million over the same period last year.

Qantas' profit guidance follows a three per cent drop in revenue to $3.98 billion for the three months to September 30, from $4.11 billion a year earlier, hurt by stiff international competition and a subdued domestic market.

Both airlines are hoping their restructuring programs will help offset some of the tough market conditions.

Cathay Pacific last month warned that overcapacity and strong competition is hurting its operations, with continued shortfalls in revenue compared with forecasts.

The Hong Kong-based airline also announced a review of its business, in a bid to boost revenue and cut costs.

image beaconimage beaconimage beacon