Virgin Australia Posts Huge First-Half Loss

A Qantas (R) and a Virgin plane sit on the tarmac at the international airport in Sydney, Australia, on June 21, 2011 Greg Wood/AFP/File

Australian carrier Virgin urged the government not to bail out rival Qantas Friday after slumping to a first-half loss of Aus$83.7 million (US$75 million), blaming intense competition and economic uncertainties.

The results follow Qantas on Thursday announcing a Aus$235 million loss over the same six month period to December 31. In response, Qantas will axe 5,000 jobs and defer aircraft deliveries.

There was no similar drastic action by Virgin Australia, the country’s second-biggest airline, despite a significant hit to its bottom line after a Aus$23 million profit in the same period last year.

Qantas is lobbying the government to provide a guarantee on its debt borrowings to help it survive, but Virgin Australia chief executive John Borghetti said this should not happen.

“Providing a financial facility to the detriment of the rest of the industry — as I hope our government and opposition agree — is wrong. Two wrongs don’t make a right,” he said.

“It is not our place to tell government what to do, but any government or opposition should think very carefully before it decides to pick winners in an industry.”

Qantas complains that it is hindered by the Qantas Sales Act which limits foreign ownership in the carrier its ability to attract capital.

It claims Virgin has an advantage through its majority ownership by Singapore Airlines, Air New Zealand and Etihad, bringing their substantial financial clout.

Borghetti said Virgin’s disappointing interim result reflected “the tough trading conditions across the entire industry for the first half of financial year 2014”.

“The Australian aviation market continues to be impacted by the significant capacity growth which occurred during the 2013 financial year, compounded by weak economic conditions and the inability to recover the cost of the carbon tax,” he said.

The airline said the country’s controversial tax — a corporate levy on each tonne of carbon pollution from Australia’s top emitters — added Aus$27 million to its costs.

Its underlying pre-tax loss — the airline’s preferred measure of financial performance — was Aus$49.7 million. While revenue jumped 6.4 per cent to Aus$2.2 billion, costs increased 4.5 per cent.

The airline declined to provide any full-year guidance.

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