Category Archives: Virgin Australia

Virgin Australia CEO: “The 2014 Financial Year has seen one of the most difficult operating environments in the history of Australian aviation”, loses $332.2 million in its fiscal year

Virgin Australia Holdings Limited (Virgin Australia Airlines) (Brisbane) reported a Statutory Loss after Tax of A$355.6 million ($332.2 million) including the impact of equity accounted investments. Financial performance for the 2014 Financial Year was impacted by the confluence of excess market capacity, weak consumer sentiment, continued economic uncertainty and the $51.6 million cost of the carbon tax.

Virgin Australia Chief Executive Officer John Borghetti said: “The 2014 Financial Year has seen one of the most difficult operating environments in the history of Australian aviation.

“While the Virgin Australia Group performed well in attracting high yielding passengers and containing cost growth over the full year, underlying revenue performance was impacted by the challenging operating conditions.

“Notwithstanding these conditions, it was important for the Virgin Australia Group to complete the Game Change Program strategy and strengthen our balance sheet in order to deliver sustainable returns for shareholders over the long-term.

“Over the 2014 Financial Year, the Group further increased revenue from the Corporate and Government market segment, which now represents over 25 per cent of our domestic revenue, far exceeding our original goal of 20 per cent.

“Furthermore, our success in integrating the Skywest8 business has enabled us to significantly grow revenue from the Charter segment, increasing comparative revenue by around 30 per cent on the 2013 Financial Year. We have also positioned our loyalty program Velocity Frequent Flyer as a significant value driver for the Group, with the highest annual membership acquisition in the program’s history and a significant increase in member engagement.

“The Group’s cost program delivered a significant reduction in cost growth over the second half of the 2014 Financial Year, with growth in Cost per Available Seat Kilometre (Underlying CASK)9 including fuel and foreign exchange halving to approximately 2 per cent – a strong performance given we had lower capacity growth and we continue to invest in product and service initiatives for our customers.

“As a result of several major balance sheet initiatives executed during the year, the Virgin Australia Group finished the year with a total cash position of $783.8 million and an unrestricted cash position of $541.0 million.

“Virgin Australia also re-entered the Australian domestic budget market through the acquisition of a 60 per cent interest in Tigerair Australia at the beginning of the 2014 Financial Year. Over the last 12 months Virgin Australia has worked with Tiger Airways Holdings Limited and Tigerair Australia to overhaul revenue and accounting systems, develop the management team, improve asset utilisation and enhance the operational platform. Tigerair Australia’s performance needs to be viewed in the context of overall industry performance and weak consumer sentiment, particularly in the last quarter of the year, which has a more pronounced impact on low cost carriers. As a result of progress made during the 2014 Financial Year, and in particular marked increases in customer satisfaction, Tigerair Australia is now well positioned to benefit from a recovery in the domestic market when conditions improve.

“While the 2014 Financial Year has been an extremely tough year for the industry, I am confident that the Virgin Australia Group is in a strong strategic position going forward.

“This next period for us is about maximising the Group’s potential, by extracting value from the business and generating sustainable profitability”, Mr Borghetti said.

Financial and Operating Performance

“Total Group Revenue increased 7.1 per cent to $4,306.6 million on the 2013 Financial Year, including the additional revenue associated with the acquisition of Skywest. While revenue growth in the leisure and regional segments was subdued, this was partially offset by revenue growth in the Corporate and Government, Charter and Interline and Codeshare segments.

“Group Yield increased by 1.2 per cent, driven by a change in customer mix and improved access to global distribution channels following the introduction of the SabreSonic system in January 2013.

“The recently acquired Skywest business has now been fully integrated into the Virgin Australia platform and we are seeing positive performance from the Charter business which has increased its comparative revenue contribution by 30 per cent this financial year.

“International revenue increased 2.6 per cent compared to the 2013 Financial Year against the backdrop of strong competition and a particular weakness in the South East Asian market.

“As we outlined in February, Virgin Australia increased its focus on driving down costs during the second half of the 2014 Financial Year. Over the half, we implemented a number of major cost reduction initiatives including programs to reduce overall employment and procurement costs, as well as introducing a new Fuel Management System, targeting 2 per cent fuel efficiency savings by the end of Financial Year 2015.

“While there was a material increase in overall costs this year due to the full year impact of the Skywest acquisition in April 2013, Underlying CASK growth was well contained over the year, with a particularly strong performance in the second half.

“Virgin Australia incurred $117.3 million of restructuring costs11 during the 2014 Financial Year as a result of the balance sheet initiatives undertaken, the completion of strategic investments and the optimisation of the business platform. The business has also taken a restructuring provision for the exit of the two original Airbus A330 aircraft, as part of our program to reduce our future cost base through further fleet optimisation, and has booked an asset impairment charge of $56.9 million, driven predominantly by excess capacity and competitive pressure in the South East Asian market.

“We continued to exceed business efficiency project targets, delivering cumulative efficiency gains of more than $191 million and remain on track to deliver cumulative productivity gains of more than $400 million over the three years to 30 June 2015.

“With Virgin Australia’s major shareholders equity accounting their investments in Virgin Australia from 1 July 2014, it was appropriate for Virgin Australia to align its accounting policies with those of its shareholders and other industry participants. Consequently, a revised maintenance policy in relation to leased aircraft has been adopted which required a restatement of prior financial year results in the Appendix 4E. As a result of the adoption of this maintenance policy, there is an increase in the opening retained earnings and the equity of the business of $67.2 million.

“Virgin Australia operates a very successful Australian dollar designated hedging program, providing a large degree of short term certainty and longer term participation and protection. The program achieved effective fuel and foreign exchange rates during the 2014 Financial Year, delivering a result that was significantly favourable compared to spot prices.

“In order to reduce the volatility of reported financial performance attributed to the hedging program, Virgin Australia will adopt AASB 9 – Financial Instruments early, from 1 July 2014. As a result of the early adoption of this accounting standard, future statutory financial results going forward are expected to reflect reduced accounting ineffectiveness and deferral of time value of options until maturity for qualifying hedges. In the 2014 Financial Year, time value of options has been separately identified from the underlying results in anticipation of adopting this standard. The 2013 comparatives have been restated in the Financial Year 2014 ASX presentation to reflect this treatment.

“Virgin Australia acquired a 60 per cent interest in Tigerair Australia on July 8, 2013, with our share of equity-accounted losses for the 2014 Financial Year amounting to $46.1 million. Despite the challenging operating conditions, Tigerair Australia carried 500,000 more passengers than the previous year, with passenger numbers increasing to 3.3 million for the 2014 Financial Year.

“In terms of capacity growth, Virgin Australia recorded normalised growth of 0.112 per cent across the domestic network (excluding Tigerair Australia) for the 2014 Financial Year.

“Importantly, during the 2014 Financial Year, domestic Revenue Load Factors expanded 1.8 percentage points to 76.9 per cent, supported by a record 17.3 million customers choosing to fly with us.

“Virgin Australia is focused on delivering on time services for all of our customers and we have achieved an On Time Performance (OTP) of 84.0 per cent for the 2014 Financial Year, an increase of 2.9 percentage points compared to the prior corresponding period”, Mr Borghetti said.

Cash Position

“Virgin Australia paid down approximately $200 million in Gross Debt during the second half of the 2014 Financial Year and finished the year with a total cash balance of $783.8 million and an unrestricted cash balance of $541.0 million, up $203.3 million and $214.5 million respectively on 30 June 2013.

“We have significantly enhanced our balance sheet and liquidity through initiatives such as the issue of Enhanced Equipment Notes in October 2013, the Entitlement Offer in November 2013 and the sale and lease back of our Brisbane based office in May 2014. The proposed transaction with Velocity Frequent Flyer announced today will see a further boost to the liquidity position of the Group.

“Virgin Australia remains focused on maintaining a strong unrestricted cash balance and continues to review ways to utilise resources more efficiently”, Mr Borghetti said.

Game Change Program Strategy Update

“When we introduced the Game Change Program, it was a long-term strategy to reshape the airline and establish the Virgin Australia Group as a long-term player in all key segments of the Australian aviation market.

“Over the 2014 Financial Year, the Group focused on fast-tracking the completion of the Game Change Program and finished the strategy ahead of schedule.

“I am pleased to report that we have now increased our percentage of domestic revenue from the Corporate and Government market segment to more than 25 per cent, far exceeding our original strategic goal of 20 per cent. This is an enormous credit to all of our team members, who have worked tirelessly to ensure we could attract this important market segment.

“As a result of the important alliances we have forged and the implementation of SabreSonic, we have developed a comprehensive global virtual network and accessed growth markets around the world. In just a few years, the business has grown from offering around 150 destinations to more than 460 destinations and increased interline and codeshare traffic by more than 300 per cent.

“At the same time we have completed the important process of integrating and aligning the airline operations and brands, delivering and investing in one strong Virgin Australia brand that is recognised around the world.
“Under the Game Change Program, Velocity Frequent Flyer has gone from strength to strength, expanding its global network to over 460 destinations and offering competitive earn and redemption rates and unique member rewards. Over the last four years, the program has doubled membership numbers to 4.5 million and has built the widest retail offering of any program in Australia. Velocity has achieved a range of industry accolades, including recognition in five categories at the 2014 Freddie Awards, the highest achievement of any airline program at these global awards.

“Completing the transformation of the in-flight and on-the-ground experience under the Game Change Program has been a key focus for the business during the 2014 Financial Year, with significant enhancements to our lounge network, in-flight entertainment and catering”, Mr Borghetti said.

“It is thanks to the tireless efforts of every one of our team members that we have successfully implemented this strategy ahead of schedule in a challenging environment. We have transformed the business and our research indicates that we have now established Virgin Australia as the airline of choice14. Therefore we can confidently say that “The Game” has changed.

“I would like to thank all of our team members for their passion and dedication in delivering the strategy”, Mr Borghetti said.

Virgin Vision 2017

“Now that we have completed the Game Change Program, this next period for us is about maximising the Group’s potential, by extracting value from the business and generating sustainable profitability. To do this, we need to increase the growing customer loyalty to the Virgin Australia Group. That is what will assure our business of a stable future revenue stream and enable us to deliver sustainable profitability as the market recovers.

“A few years ago, many travellers were wedded to our competitor because they had no other viable alternative. The Game Change Program essentially created an indifference15 and helped to dislodge those travellers loyal to the incumbent airline group, so that they were happy to travel with either of us, whilst building a Virgin Australia loyalty base.

“Going forward, we no longer want to create an indifference for this group, we want to convert more of them to our loyalty base. Therefore, our Virgin Vision to 2017 is to become Australia’s favourite airline group.

“Over the next three years, the Virgin Australia Group will focus on six key areas: capitalising on growth business opportunities, driving yield enhancement, implementing a new cost program, optimising the balance sheet, setting a new standard in customer experience and developing our people to their full potential”, Mr Borghetti said.

Capitalizing on growth business opportunities

Velocity Frequent Flyer

“Velocity Frequent Flyer will be one of our key growth businesses, as we aim to build one of the world’s leading loyalty programs. Today’s announcement regarding a strategic transaction for Velocity Frequent Flyer is just the beginning. This transaction represents an opportunity to accelerate growth and value for Velocity and the Virgin Australia Group. Over the next three years we plan to grow membership to more than 7 million, further diversify Velocity’s partner mix, increase partner numbers and strengthen member engagement in both points earned and points redeemed.

Charter

“Charter also represents a significant opportunity for the Group to grow and diversify revenue. Our Charter business has had a very successful first year, delivering comparative revenue growth of around 30 per cent for the 2014 Financial Year, from a combination of new contracts, growth from existing clients and the launch of our first charter operations on the East Coast. This business continues to represent strong growth opportunities for the Group, and we expect it to deliver more than $200 million in revenue by 30 June 2017.

Freight

“In the 2015 Financial Year, we will launch a Freight division, which will leverage off our current Regular Passenger Transport and Charter capability. We expect the freight business to grow on a similar trajectory to our new charter business with revenue expected to treble to between $150 and $200 million over the next three years to 30 June 2017.

Tigerair Australia

“Our investment in Tigerair Austraia presents an important opportunity for the Group to participate in the growth of the budget market segment.

“The Tigerair business has undergone the first year of its transformation program, which sets out a clear path to profitability. The focus over the next three years will be on successfully executing this program, to achieve profitability in Financial Year 2017.

“This includes:

Further improving customer satisfaction – Customer experience is a major driver of revenue growth and will be a strong focus for Tigerair Australia, with significant progress already made during the 2014 Financial Year.
Driving incremental revenue growth – Tigerair Australia has implemented a number of revenue enhancing initiatives this year, including a new revenue management system. Further initiatives to help drive incremental revenue growth will be rolled out.

Delivering cost synergies – Tigerair Australia will implement a range of network, operational and financial synergies, building on the cost savings from synergies already delivered, including the launch of the Brisbane base, coordinated pricing and joint procurement of fuel purchases with Virgin Australia.

Develop an efficient operating platform and network footprint – Operational efficiency will be a continued focus. Tigerair has made a number of enhancements this year which will drive benefits, including launching a Brisbane base, securing a new more efficient maintenance provider in BAE systems and reaching agreement with Sydney Airport Corporation Limited about infrastructure constraints at Sydney Airport.

“We are committed to working with Tiger Airways Holdings Limited and Tigerair Australia to ensure the airline has the right network footprint, service standards and cost leadership, to deliver improved financial performance.

Drive yield enhancement

“In addition to capitalising on growth businesses, we will be focusing on other opportunities to drive yield enhancement. This includes increasing our target of Corporate and Government domestic revenue mix to around 30 per cent by 30 June 2017; increasing interline and codeshare revenue through strengthening and expansion of alliance partnerships and optimising our new PROS revenue management system to drive incremental revenue opportunities.

$1 billion cost program

“Importantly, cost will be a major focus over the next three years, building on the work of the Business Efficiency Project. Over the five years to 30 June 2017, the program will generate $1 billion in cumulative productivity gains and will centre on the following:

Enhancing procurement – individually and with alliance partners.

Improving productivity – including increased fuel efficiency, increased utilisation of the Boeing 737 fleet and the retirement of two 12 year old Airbus A330 aircraft; as well as bringing forward our Boeing 737 Max aircraft deliveries from 2019 to 2018.

Streamlining our operations – including the integration of Virgin Australia’s New Zealand operations into the rest of our international business and the consolidation of our long-haul international bases from three into two.
Optimise the balance sheet

“Going forward, optimizing the balance sheet will be central to maintaining a strong platform. The proposed transaction with Affinity Equity Partners and Velocity Frequent Flyer will improve the liquidity and gearing position of the Virgin Australia Group even further, providing additional flexibility and resilience as we execute on “Virgin Vision 2017”.

“As a result of this transaction, lease-adjusted balance sheet gearing will reduce by 8 per cent. The Group profit and loss impact from this transaction is expected to be neutral in the 2015 Financial Year. Over the next three years, we will continue to execute initiatives designed to improve liquidity, reduce debt and maintain a strong cash balance.

Set a new standard in customer experience

“The Virgin Australia Group will also maintain its strong focus on product and service and over the next three years, we will set a new standard in customer experience.

“While we cannot disclose all the initiatives for competitive reasons, they include: the introduction of Business Class on our Trans-Tasman and Fiji services from February 2015; the launch of our first Premium Exit at our Melbourne Airport lounge next month; the unveiling of a new state-of-the-art airport ground experience with the opening of our new terminal and lounge in Perth next year; and the upgrade of our Brisbane terminal and launch of our Darwin lounge in March next year.

“Furthermore, in the next few weeks, we will make a major announcement on our premium product offering.

Develop our people to their full potential

“Our people, and their willingness to go above and beyond for our customers and our shareholders, remains the Virgin Australia Group’s core differentiator in the market.

“We are committed to remaining the most attractive employer in the industry and, for that matter, one of the most desirable employers in Australia. It is our ability to attract, develop and retain the best talent, not just in the industry, but across Australia and beyond, that will see us succeed. Over the next three years, we will be rolling out a range of initiatives to continue to develop our people to their full potential.

“I would like to take this opportunity to thank all of our team members for their passion and dedication to delivering the Game Change Program strategy. We are privileged to have such a talented, devoted team and we are committed to supporting their development”, Mr Borghetti said.

Conclusion and Outlook

“The 2014 Financial Year was an extremely challenging year for the Virgin Australia Group and the Australian aviation industry as a whole.

“Given the uncertain economic environment we are unable to provide guidance for the 2015 Financial Year at this time and we will not be providing guidance on capacity growth going forward.

“However, the Virgin Vision to 2017 sets out a comprehensive plan of initiatives that will see us deliver a sustainable, profitable business over the long-term.

“While the current environment remains challenging, the Virgin Australia Group has significantly enhanced its strategic position over the last four years and is well placed to capitalise on market recovery”, Mr Borghetti said.

Virgin Australia:

Virgin Australia to upgrade the Los Angeles-Brisbane route to daily service on October 26, drops Los Angeles-Melbourne

Virgin Australia Airlines (Brisbane) has announced that it will increase services between Brisbane and Los Angeles, moving from four roundtrip services per week to daily return services, effective October 26, 2014.

Following this change, the Virgin Australia and Delta Air Lines trans-Pacific joint venture will offer two daily services between Sydney and Los Angeles and one daily service between Brisbane and Los Angeles.

The additional Brisbane services will be flown by Virgin Australia’s three-class Boeing 777-300 aircraft.

In order to increase services on the Brisbane route, Virgin Australia will cease services between Melbourne and Los Angeles, with the last flight operating from Melbourne on October 25, 2014. Effective October 26, 2014, there will also be a minor change to the departure time of Sydney to Los Angeles flights to allow an earlier arrival into Los Angeles, creating a more convenient schedule for corporate and leisure travellers. There will be no reduction in Virgin Australia capacity between Australia and the United States following these changes.

Virgin Australia:

Virgin Australia becomes the Official Airline of the Fremantle Football Club

Virgin Australia Airlines (Brisbane) today (March 28) announced it has become the Official Airline of the Fremantle Football Club (rugby) and the Premier Partner and Official Airline of the West Coast Eagles for the next five years.

As part of the airline’s ongoing commitment to Western Australia, the airline today also unveiled a unique ‘give-back’ program designed to deepen the support between fans and the clubs.

From today, Virgin Australia will give $10 back to clubs for every flight taken by Velocity Frequent Flyer members who register their club preference during the 2014 Toyota AFL Premiership Season.

Virgin Australia will also reward the WA fans that fly the most during the season with an exclusive seat on board a charter flight from Perth to the AFL Grand Final, including tickets to the game and accommodation.

Read the full story from the football club: CLICK HERE

Virgin Australia:

Virgin Australia posts a first half loss, blames QANTAS for flooding the market

Virgin Australia Airlines (Brisbane) meanwhile posted a half year loss of A$83.7 million ($75 million US). The carrier blamed the loss on too much capacity.

Read the full report: CLICK HERE

Meanwhile Virgin Australia has responded back to QANTAS, claiming the airline is flooding the market so that both carriers lose money. Read the response and video from the Sydney Morning Herald: CLICK HERE

Copyright Photo: Micheil Keegan/AirlinersGallery.com. Embraer ERJ 190-100 IGW VH-ZPR (msn 19000424) arrives in Perth in Western Australia.

Virgin Australia:

Virgin Atlantic Airways to drop service to Sydney on May 5

Virgin Atlantic Airways (London) is dropping all service to Sydney, Australia due to increasing costs. The carrier will drop the Hong Kong-Sydney extension on May 5. The airline will continue to operate the London (Heathrow)-Hong Kong portion of the route.

The airline issued this statement:

It is with regret that Virgin Atlantic has announced, its intention to withdraw operations between Sydney and Hong Kong from May 5, 2014, due to increasing costs and a challenging economic environment.

However, Virgin Atlantic will continue to operate services, between London Heathrow and Hong Kong.

Craig Kreeger, Chief Executive at Virgin Atlantic said:

“We intend to withdraw our services between Sydney and Hong Kong. Despite the best efforts of our employees, external factors such as increasing costs and a weakening Australian dollar have affected our profitability.”

“These are still difficult times for the airline industry and as part of our strategy to operate more efficiently we need to deploy our aircraft to routes with the right level of demand to be financially viable.”

At this stage, we will continue to operate our full published schedule below.


London Heathrow	21:30	Hong Kong	17:40	VS200
Hong Kong	19:10	Sydney	07:30*	VS200

Sydney	15:45	Hong Kong	22:00	VS201
Hong Kong	23:30	London Heathrow	04:50**	VS201

* +2 days
** + 1 day

Copyright Photo: John Adlard/AirlinersGallery.com. Airbus A340-642 G-VSHY (msn 383) in the 1999 livery completes its final approach to the runway in Sydney.

Virgin Atlantic Airways:

Virgin Australia celebrates 10 years of international flying, announces new codeshares

Virgin Australia Airlines (Brisbane) today celebrated 10 years of international flights, announcing eight new international codeshare services.

The airline’s first international flight, DJ 007 departed from Christchurch, New Zealand at 11 am on January 29, 2004 for Brisbane, Australia.

Since then, the airline has grown from offering one international destination to offering over 400 destinations worldwide. Virgin Australia operates to 16 destinations internationally and through its strategic alliance partners, offers 386 codeshare and interline destinations across the world.

The eight new international codeshare services include Seattle/Tacoma and Boston with Delta Air Lines, Zurich, Minsk, Medina and Rome with Etihad Airways and Athens and Brunei with Singapore Airlines.

Copyright Photo: John Adlard/AirlinersGallery.com (all others by Virgin Australia). Airbus A330-243 VH-XFB (msn 372) departs the runway at Sydney.

Virgin Australia:

Virgin Australia welcomes its first Adelaide-based cabin crews and also talks about the “Flying Maiden”

Virgin Australia Airlines (Brisbane) today welcomed its first locally recruited and trained cabin crew members. The new crews will graduated today at Virgin Australia’s newly established Adelaide base.

The 24 participants have spent the past seven weeks being trained and tested in safety and emergency procedures, aviation regulations and medicine and the very best in customer service.

Adelaide plays an important role in Virgin Australia’s expanding domestic network, with more than 40 flights arriving and departing from the airport daily.

By opening a cabin crew base in Adelaide the airline was able to bring approximately 80 new jobs to South Australia.

The new Adelaide based cabin crew can look forward to flying on board Virgin Australia’s Boeing 737 and Embraer 190 aircraft travelling to all mainland state capitals as well as popular tourist destinations including the Gold Coast and Denpasar, Indonesia.

Additionally Virgin Australia in its blog talks about the “Flying Maiden”:

The Flying Maiden was originally developed in the style of Alberto Vargas, a pinup artist of the 1940s whose work was famously emulated on the nose of many WWII aircraft.

She was then contemporised by brand design firm Hulsbosch for Virgin Australia.

She is the stylish guardian of your Virgin Australia experience whether flying between capital cities or between countries.

The Flying Maiden is seen on the side of Virgin Australia aircraft, at our airport terminals and lounges around the country. Our partner airline, Virgin Atlantic also features its own version of the Flying Maiden, the Scarlet Lady, on its aircraft.

Top Copyright Photo: John Adlard/AirlinersGallery.com (all others by Virgin Australia). Boeing 737-8FE VH-YVA (msn 40995) arrives at Sydney.

Virgin Australia:

Etihad Airways to buy five Boeing 777-200 LRs from Air India, will fly to Los Angeles

Etihad Airways (Abu Dhabi) has announced its plans to acquire the five Boeing 777-200 LRs (Longer Range) from Air India (Mumbai). The airline issued this statement:

The two carriers signed a Letter of Intent (LOI) in Mumbai earlier this week paving the way for the deal.

The 777-200 LRs will be used on the airline’s new route between Abu Dhabi and Los Angeles, which starts on June 1, 2014.

Etihad Airways currently flies to New York (JFK), Chicago (O’Hare), Washington (Dulles), DC and Toronto (Pearson) in North America, and to São Paulo in Brazil, and has stated its ambition to add new services to both continents.

Subject to approvals, the aircraft will be delivered to Etihad Airways from the beginning of 2014 and each will be re-fitted in a three class cabin configuration consistent with similar aircraft in the Etihad Airways fleet. It is expected the first aircraft will enter service in April 2014.

The purchase comes as Etihad Airways finalizes details on a new fleet order which will meet its organic growth and expansion requirements to 2025 in line with its rolling network plan.

The Boeing 777-200 LR, of which less than 60 were manufactured, has a design range of 17,370 km, allowing it to connect almost any city in the world from Etihad Airways’ hub at Abu Dhabi International Airport.

The five Air India 777-200 LR aircraft, which Etihad Airways is purchasing, are on average, six years old, helping the airline to maintain its overall position of having one of the most modern fleets in the industry.

Etihad Airways’ current fleet will reach 87 aircraft by year end, with 14 new deliveries from aircraft manufacturers during 2013.

In other news, Etihad has announced it will increase its share in Virgin Australia Holdings to 19.9 percent. At 19.9 percent, Etihad Airways has reached the threshold approved by Australia’s Foreign Investment Review Board in June 2013.

Etihad Airways and Virgin Australia Airlines (Brisbane) signed a 10-year strategic partnership agreement in August 2010 that includes code-sharing on flights, joint sales and marketing activities, and reciprocal earn-and-burn on their respective frequent flyer programs.

For more information, please see: CLICK HERE

Finally, Etihad Airways and airBaltic (Riga) have announced a new Abu Dhabi-Riga joint route which will start on December 16, 2013.

The announcement follows the signing of a codeshare agreement between the two airlines. Subject to regulatory approvals, airBaltic will operate the new four weekly return flights using a 116 seat Airbus A319 aircraft.

With seating capacity for 14 Business class and 102 Economy class passengers, the flights will operate on a split schedule, ensuring optimal connectivity over each airline’s respective hubs in Abu Dhabi and Riga.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Air India’s Boeing 777-237 LR VT-ALD (msn 36303) prepares to touch down at London’s Heathrow Airport.

Air India:

Etihad Airways:

Virgin Australia unveils a new in-flight entertainment system

Virgin Australia Airlines (Brisbane) has officially launched its new wireless in-flight entertainment system, representing a new era in the way travelers experience entertainment in the sky according to the airline.

The entertainment platform is the first of its kind in the Asia Pacific region, giving customers the ability to stream content to their own devices, including smartphones, laptops and tablets, through in-built wireless technology on board.

Following a successful trial earlier this year, Virgin Australia is now extending the wireless innovation across its domestic and short-haul international network. Thirty-seven aircraft are now fitted out with the new technology, including aircraft operating on routes to New Zealand and the Pacific Islands, which went live today.

The roll-out across Virgin Australia’s Boeing 737-800 and Embraer ERJ 190 fleet will be complete before the end of the year.

Since the trial started in August 2012, the App has been downloaded close to 200,000 times.

The wireless in-flight entertainment system supports Wi-Fi-enabled Apple iOS devices (iPad®; iPhone®; iPod touch®), Android devices (phone or tablet) and Windows laptops. To access the system, download the free “In-flight Entertainment by Virgin Australia” App to your phone or tablet, or have the latest version of Microsoft Silverlight downloaded on your laptop.

Copyright Photo: Roy Lock/AirlinersGallery.com. Boeing 777-3ZG ER VH-VOZ (msn 35302) taxies to the gate at Los Angeles International Airport.

Virgin Australia:

Virgin Australia Holdings loses A$98.1 million for its fiscal year

Virgin Australia Holdings (Virgin Australia Airlines) (Brisbane) reported a statutory loss after taxes of A$98.1 million ($88.3 million) for its fiscal year ending on June 30, 2013. The airline issued this full financial statement for its past fiscal year:

Financial Highlights

Results in line with guidance:

Statutory Loss After Tax of $98.1 million – in line with previous guidance of a loss of $95 to $110 million
Pre-tax loss (excl. one-off transformation costs and Skywest¹ loss) of $35.2 million – in line with previous guidance of a loss of $30 to $50 million
Outperformed main competitor on Group Yield growth
Strong underlying cost performance – underlying CASK² (excl. fuel) approximately equal to FY12, inclusive of major product and service enhancements
Total cash position of $580.5 million and positive operating cash flows – several initiatives identified and in progress to supplement and diversify the Company’s liquidity position

Operational Highlights

Completed major restructuring and transformation as part of Game Change Program:

Managed critical transition to global ticketed environment and single airline designator, with SabreSonic system implemented and delivering benefits
Completed acquisition of 100% of Skywest and 60% of Tigerair Australia³, enabling repositioning of business across all key aviation market segments, creating new competitive landscape

Delivered on key targets of the next phase of the Game Change Program:

Business efficiency project generated sustainable efficiency gains of more than $60 million⁴ for FY13
Velocity Frequent Flyer membership of approx. 3.7 million, up by approx. 500,000 on FY12
Improved access to global markets – interline and codeshare revenue increased 45% on FY12 and forward domestic bookings approx. 6% higher than PCP⁵, on a capacity increase of less than 4%
Significant enhancements to customer experience – upgrade program for major lounges and airport terminals, business class roll-out complete and new in-flight entertainment installed in 30 aircraft
Leading airline in Roy Morgan’s Domestic Airline Business Satisfaction for FY13⁶

Virgin Australia Holdings Limited (ASX: VAH) reported a Statutory Loss After Tax of $98.1 million, consistent with previous guidance. A number of factors impacted the financial performance for the 2013 financial year, including the difficult economic and competitive environment, significant one-off pre-tax restructuring and transformation costs and the carbon tax.

Virgin Australia Chief Executive Officer John Borghetti said: “While the financial results clearly did not meet our initial expectations, the 2013 financial year was a pivotal year for Virgin Australia, in which we completed our major restructuring and transformation program and reshaped the competitive landscape of the Australian aviation market, despite a very difficult economic environment and intense competition.

“As part of this program, we secured access to the growing budget, charter and regional market segments, we successfully executed the crucial transition from a ticketless to a global ticketed airline environment with the implementation of the our new booking and check-in system, SabreSonic, and we further enhanced the Virgin Australia customer experience. Each of these initiatives is critical to our success going forward.

“Furthermore, we exceeded our business efficiency program target of $60 million in sustainable efficiency gains, we expanded Velocity Frequent Flyer and improved its value proposition, increased our access to global markets and further developed the most important part of our airline, our people.

“We continued our strong focus on yield, with consistent yield growth in each month of the last quarter of the financial year. This reflects our success in attracting higher-yielding customers, while ensuring we are well-positioned in the market as we enter the 2014 financial year.

“We maintained a disciplined approach to cost management, with underlying CASK growth (excluding fuel) for the 2013 financial year approximately equal to last year, notwithstanding the significant investment in product enhancements.

“The 2014 financial year represents the fourth year of our five-year Game Change Program strategy in which we will focus on consolidating our market positioning in order to drive earnings growth.

“As we move into the new financial year, we continue to grow yield and build loads, supported by our improved access to global distribution channels, through SabreSonic. Preliminary operating statistics for July 2013 indicate positive yield⁷ growth and domestic loads of 79.6 per cent.

“We now have the right structure in place to compete vigorously in all key market segments and achieve sustainable performance in the future”, Mr Borghetti said.

Financial and Operating Performance

“Revenue and income increased 2.6 per cent on the 2012 financial year, following growth of 19.8 per cent on the 2011 financial year. This reflects the weaker trading conditions experienced during the 2013 financial year and the impact of the introduction ofSabreSonic, which includes approximately $25 million from the waiving of ancillary fees in order to protect the customer experience, as well as forgone revenue due to the scheduled cutover of the booking system.

“Excluding Skywest and not adjusting for approximately $25 million of waived ancillary fees, the underlying loss before tax for Virgin Australia is $72.8 million⁸.

“Due to our strengthening relationships with international airline partners, interline and codeshare revenue continued to grow strongly, with a 45 per cent increase on the prior corresponding period.

“Domestic Business Class passengers continue to increase, with passenger traffic in the Business Class cabin more than doubling compared to the 2012 financial year.

“The result includes the underlying pre-tax trading loss of $9.4 million for the recently acquired Skywest business, reflecting the investments being made to integrate and facilitate the growth of the business.

“Our international operations continue to perform well as a result of the network changes we made as part of the Game Change Program and our alliance partner strategy. International revenue increased by 6.4 per cent compared to the 2012 financial year, off capacity growth of 3.0 per cent, and the business continues to be EBIT positive.

“Virgin Australia outperformed our major competitor on Group Yield growth for the second year running, with relatively flat Group Yield⁹ growth for the 2013 financial year.

“We incurred $105.1 million of significant one-off pre-tax costs as a result of the major restructuring and transformation program. The transition to a global ticketed environment, a single airline designator code and new core IT systems (including a new data warehouse and a new revenue accounting system) comprised the majority of this cost, totalling $81.5 million. This incorporated a comprehensive 12 month staff training program, technical costs of the system cutover, resources for customer management and communications, and other costs associated with the transition. Other one-off restructuring and transformation costs include the restructure costs associated with the Skywest and Tigerair Australia transactions, the integration of Skywest and business transformation initiatives, totalling $17.3 million. The business also incurred $6.3 million of costs associated with accelerated depreciation on legacy assets.

“While significant one-off costs affected our profitability for the year, we maintained strong controls on costs, with underlying CASK¹⁰(excluding fuel) for the 2013 financial year approximately equal to that of the 2012 financial year, even with significant enhancements to product and service.

“The company was also impacted by the carbon tax during the 2013 financial year, with a $47.9 million cost of which we were unable to recover due to strong competition in the market.

“Importantly, we have made significant progress in our plan to streamline the ongoing costs of the business as it grows. In its first year, our business efficiency program has exceeded targets, delivering sustainable efficiency gains of over $60 million and is on track to deliver cumulative productivity gains of approximately $400 million over the three years to 30 June 2015.

“Our tiered hedging policy continues to be successful in providing short term certainty in a volatile environment, while enabling us to maintain flexibility in the longer term.

“In line with guidance¹¹, we recorded capacity growth of 6.3 per cent across our domestic network for the 2013 financial year. As previously stated, we expect domestic capacity (excluding Tigerair Australia) to grow between 3 and 4¹² per cent in the first half of the 2014 financial year.

“On Time Performance for the Virgin Australia brand was roughly in line with that of our major competitor’s branded operations, at 81.1 per cent for the 2013 financial year¹³. This includes the impact of the transition to SabreSonic, which affected On Time Performance during the third quarter of the year”, Mr Borghetti said.

Liquidity and Cash Flow

“We finished the 2013 financial year with a total cash position of $580.5 million and an unrestricted cash position of $326.5 million as at 30 June 2013.
“Improved underlying cost disciplines across the business have supported positive cash flow generated from operations¹⁴ of $184.2 million across the 2013 financial year.

“We continue to review Virgin Australia’s assets to ensure we are utilising our resources in the best way possible. As part of this process, over the year we have executed the sale and lease-back of the Virgin Australia hangar at Brisbane Airport and several other initiatives have also been identified and are underway to supplement and diversify our liquidity position.

“This includes conditional commitments for a new term loan facility from Air New Zealand (NZX: AIR), Etihad Airways and Singapore Airlines (SGX: SIA) for an aggregate amount of AUD90 million, as part of our focus on supplementing and diversifying the Company’s liquidity position”, Mr Borghetti said.

Game Change Program Strategy Update

“We have concluded the first phase of the Game Change Program with the completion of significant restructuring and transformation initiatives, which are essential to ensure the Group can compete effectively in all market segments and to create a solid platform for growth”, Mr Borghetti said.

Systems and Processes

“Central to the Game Change Program is building a strong flexible operating platform, through strengthening our systems and processes.

“Thanks to the significant work undertaken internally we have now created this platform. Over the past three years we have implemented a new Treasury management framework, an improved group-wide procurement framework, improved operating and financial disciplines and a business efficiency program to drive better cost efficiencies and operational effectiveness.

“During the 2013 financial year, we completed one of the most significant initiatives in Virgin Australia’s thirteen year history. We transitioned from a ticketless environment to a global ticketed environment, moving from a low cost carrier system to become a full service airline with better access to global distribution channels and the ability to provide a more seamless customer experience. This involved moving from two booking and check-in systems and two airline designator codes to one globally-recognised system and one airline designator code, with the implementation of SabreSonic in January 2013.

“This new system is critical to our ability to continue to grow the business, increasing our exposure to the corporate and government market and to travel agents both in Australia and around the world. It was therefore crucial that we implemented the system as quickly as possible, with minimal disruption to the customer experience, even though that meant significant one-off costs for the business during the 2013 financial year.

“The new SabreSonic system is already supporting our ability to increase yield. For example, domestic bookings made within the final three weeks prior to departure have experienced a doubling of yield premium to 20 per cent, whilst the number of domestic bookings has improved by 15 per cent over the prior corresponding period¹⁵.

“The system will also make it easier for us to work with our current alliance partners and to add new alliance partners, as it aligns with industry standard practices and supports IATA protocols.

“SabreSonic is central to providing an improved travel experience, making it easier for customers to transfer between our flights and those of our partner airlines and offering customers more online self-service options and a greater choice of flights”, Mr Borghetti said.

Product and Service Enhancements

“One of the key aims of the Game Change Program is to establish a superior position in customer experience, while maintaining our cost advantage. This has been a priority during the 2013 financial year as we implemented the final initiatives of our major transformation program and continued to innovate in order to maintain our leadership in this area.

“During the year we completed the roll-out of business class to our domestic fleet, with new cabins on our Embraer 190 aircraft, giving travellers in Australia choice in business class for the first time in over a decade.

“We have expanded existing lounges in key capital cities to meet growing demand and we have launched a new 300 seat lounge in the nation’s capital, Canberra. The refurbishment and extension of our Sydney lounge is now complete. By the end of the 2013 calendar year, we will have completed the expansion of our Melbourne lounge and opened a new lounge in Cairns, with new lounges in Darwin and Perth to open in calendar year 2014.

“We also continued to enhance the airport terminal experience for our customers. In the 2013 financial year we launched Virgin Australia’s state-of-the-art terminal facilities in Canberra and completed the refurbishment of terminal facilities in Melbourne and our extended pier at Sydney Domestic Airport’s Terminal 2.

“In-flight entertainment is critical to customer satisfaction in the air and we have made substantial progress on the implementation of the wireless content streaming technology, with 30 aircraft fitted out and the rest of the domestic Boeing and Embraer fleet to be completed by the end of the year.

“Innovation will remain core to the Virgin Australia brand and we have a range of new product and service initiatives planned for the 2014 financial year to ensure we retain our leadership position, while maintaining a low cost base”, Mr Borghetti said.

Velocity Frequent Flyer

“Membership of the Velocity Frequent Flyer program has grown to approx. 3.7 million, an increase of approximately 500,000 members from the end of June 2012. We continue to see steady growth across all metrics of the business and we are confident that we are on track to achieve our target of 5 million members by the end of the 2015 financial year.

“Over the 2013 financial year we increased the number of hotel partners by 80 per cent and added a range of new partners, maintaining the widest retail offering of any loyalty program in Australia.

“We have launched a number of successful new initiatives aimed at engaging members. We were first to market with a new multi-currency pre-paid travel card, the Global Wallet, combining the Velocity membership card with a Visa pre-paid travel card capability. We also launched Australia’s first pet frequent flyer program and a Velocity Frequent Flyer Facebook presence.

“Going forward, we are focused on continuing to strengthen and mature the business to optimise Velocity Frequent Flyer for ongoing growth”, Mr Borghetti said.

Network and Alliances

“We have further expanded our extensive global network over the 2013 financial year, offering a range of benefits to travellers and providing access to more than 460 destinations across five continents, with the ability for our Velocity Frequent Flyer members to earn Points and Status Credits on all flights. This represents an increase of 27 destinations on the prior corresponding period.

“We are very pleased to have the support of our strong airline alliance partners, Air New Zealand, Delta Air Lines, Etihad Airways and Singapore Airlines, which is critical to the success of our business.

“We continue to work closely with these partners on improving our offering for customers and also on identifying other opportunities to create efficiencies and enhance the customer experience”, Mr Borghetti said.

Regional Operations

“In May 2013 we launched Virgin Australia’s regional operation, following the acquisition of the Western Australia based Skywest).

“We have made significant progress with the integration of Skywest into the Virgin Australia Group, including the roll out of Virgin Australia branding across the airline’s operations and the transition to the same SabreSonic system as Virgin Australia, aligning website and airline designator codes.

“Work is well advanced on integrating the networks of the two airlines to explore opportunities for growth and to enhance the customer proposition. For example, earlier this month we launched Virgin Australia’s two-class Embraer aircraft to the important mining hub of Kalgoorlie, as well as Fokker 100 services to the oil and gas port of Onslow.

“We are now well positioned to compete in the regional and charter markets in the 2014 financial year”, Mr Borghetti said.

Tigerair Australia

“We completed the acquisition of 60 per cent of Tigerair Australia in July 2013, enabling us to re-enter the high-growth budget market segment, which is a key part of our overall strategy.

“We have observed positive performance trends to date and we expect performance improvements to be driven by three key factors.

“Firstly, increasing the scale of the business by growing the fleet to 23 aircraft, with the potential to increase up to 35, which we believe will bring economies of scale and deliver a further cost advantage. Secondly, improving operational and service standards to enable the business to increase yields.

Recent performance indicators have been positive, with load factors for July 2013 at 92.0 per cent, an increase of 8.2 points on the same time last year.

Thirdly and finally, we believe margins will be improved by extracting synergies through leveraging off shareholders for certain functions such as procurement”, Mr Borghetti said.

Our People

“Our people and the service they deliver continue to be our main differentiator in the market. During the 2013 financial year we implemented an organisational change program designed to develop a more customer-centric culture in all aspects of our business.

“Virgin Australia has received a range of accolades over the year for its achievements in customer service, including our recognition at the Roy Morgan Customer Satisfaction Awards as Domestic Airline of the Year and at the World Airline Awards for ‘Best Airline Staff Service” in the Australia/Pacific region for the third consecutive year. The Roy Morgan Customer Satisfaction results for the 2013 financial year demonstrate that we are leader in Domestic Airline Business Satisfaction, with 81 per cent of customers very or fairly satisfied.

“I would like to express my sincere gratitude to all team members for their tireless dedication to Virgin Australia as we continue to progress our Game Change Program strategy. In a year of major restructuring and transformation, they have demonstrated great passion and tremendous skill and they will continue to be the drivers of our success going forward”, Mr Borghetti said.

Outlook

“Given the uncertain economic environment we are unable to provide guidance for the 2014 financial year at this time”, Mr Borghetti said.

¹1Refers to Skywest Airlines Pte Ltd (formerly known as Skywest Airlines Ltd). Acquisition was completed 19 April 2013
²Underlying CASK is a non-statutory measure and is defined on page 10 of this media release
³Refers to Tiger Airways Australia Pty Ltd. Acquisition was completed 8 July 2013
⁴This figure has not been audited or reviewed by KPMG
⁵As at 30 June 2013, compared to the prior corresponding period (PCP) of 30 June 2012
⁶Source: Roy Morgan Research, July 2012 – June 2013. Finished the 2013 financial year at 81.0% domestic business travellers very or fairly satisfied compared to Qantas at 78.8%
⁷For the purposes of comparison this excludes the Regular Passenger Traffic segment previously operated by Skywest
⁸Underlying Profit / (Loss) Before Tax (PBT) excludes Skywest and is a non-statutory measure used by Management and VAH’s Board as a primary measure to assess financial performance of Virgin Australia and individual segments. Refer to page 9 of the media release for a reconciliation of Statutory and Underlying PBT
⁹Group Yield excludes Skywest
¹⁰Underlying CASK is a non-statutory measure and is defined on page 10 of this media release
¹¹Capacity growth includes Virgin Australia Regional (previously Skywest) for May and June FY13 figures
¹²FY14 growth target takes into account Virgin Australia Regional for the full prior comparable period, and excludes Tigerair Australia
¹³In accordance with the Bureau of Infrastructure, Transport & Regional Economics definitions, flight departure is counted as “on time” if it departs the gate within 15 minutes of the scheduled departure time shown in the carriers’ schedule. Compares the departure OTP results of Virgin Australia-branded operations (Virgin Australia and Virgin Australia Regional Airlines) with Qantas-branded operations (Qantas and QantasLink), which recorded a result of 81.9%
¹⁴Excludes business transformation and net finance costs
¹⁵Refers to domestic bookings made through all sources and compares the 4 trading weeks of July 2013 to 4 weeks of trading in July 2012

Copyright Photo: Ivan K. Nishimura/Blue Wave Group. Boeing 737-8FE VH-YIA (msn 37824) passes through Honolulu on its long delivery segment of flights.

Virgin Australia: