Virgin Australia profits are suffering from a weak domestic market

Photo: Cameron Spencer/ Getty Images.

Virgin Australia’s profits are being squeezed by a fall in the number of people flying within Australia.

Australia’s second largest airline reported a drop of $27.1 million to $45.9 million in underlying profit before tax for the second quarter of the financial year, compared to the same period last year.

Statutory profit after tax for the three months to December was $13.1 million, including overheads from ongoing restructuring of the business.

The company says it now expects the Virgin Australia domestic business to generate an underlying earnings before interest and tax margin of between 3% and 6% for the full financial year.

“The group continues to actively manage capacity in response to subdued trading conditions,” Virgin says.

“In the second quarter, total sectors flown in the Virgin Australia Domestic business declined 5% on the prior corresponding period.”

In its quarterly trading update, Virgin reported that it had reduced debt by $936.3 million, a 44.5% improvement.

Virgin is due to report first half results on February 17.

In August, Virgin posted a full year loss of $224.7 million, reflecting the cost of building a more efficient airline. The result was impacted by $440.5 million in restructuring charges. Full year revenue was up 5.7% to $5.021 billion.

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