Virgin Australia feels pinch from competition and tax
Carrier pins hopes on alliances after profits miss forecasts with a 56 per cent plunge
Virgin Australia, the country's second-largest carrier, posted first-half profit that missed analyst estimates amid a fight with Qantas Airways for passengers and the impact of a carbon tax.
Net income slumped 56 per cent to A$23 million (HK$183.57 million) in the six months to December, the company said in a statement yesterday. That missed the median analyst estimate of A$50 million. Revenue climbed 5.4 per cent to A$2.1 billion as passenger numbers rose 2 per cent to 10.1 million.
The profit drop puts pressure on chief executive John Borghetti's plans to challenge Qantas' 65 per cent share of Australia's domestic market by winning corporate travel accounts.
Virgin, which sold a stake to Singapore Airlines last year, is seeking to buy Tiger Airways' Australian unit and regional carrier Skywest Airlines as part of a strategy to build on alliances.
"The shine that Virgin had over the past 18 months or so is starting to wear off," said Evan Lucas, a strategist at IG Markets. "It's stuck in the middle and is buying a competitor that's basically going to mean competing with itself."
The introduction of a carbon tax in Australia cost the airline A$24.4 million in the half-year, which it could not recover from airfares because of "aggressive competition", the company said.