Virgin Australia's losses deepen

Photo: Cameron Spencer/ Getty Images.

Virgin Australia posted a loss of $224.7 million for the 2016 year, reflecting the cost of building a more efficient airline.

The result was impacted by $440.5 million in restructuring charges.

Revenue was up 5.7% to $5.021 billion.

Underlying profit before tax was $41 million for the 2016 financial year, in line with guidance, and an improvement of $90.1 million on 2015.

The airline says it is on track to exceed its existing target of $1.2 billion in cumulative cost savings by the end of the 2017 financial year.

“Based on current business performance, the group’s positive momentum is expected to continue,” says CEO John Borghetti.

“However, due to market uncertainty, we are unable to provide further detail at this time.”

On the domestic market, underlying EBIT (earnings before interest and taxes) grew by 45.8% to $162.0 million.

That improved revenue stream was driven by better a 3.4% rise in yield and by growing the airline’s share of the more profitable corporate and government segment.

“These results were delivered in a challenging operating environment affected by subdued consumer demand, the downturn of the resources sector and uncertainty around the economy and political events,” says Borghetti.

Virgin, like Qantas, has cut seat capacity in response to falling demand.

This chart shows Virgin’s improve earnings performance :

Virgin has recently raised $A1.1 billion in equity raisings.

The airline also has a cost saving target of $300 million a year from aircraft retirement, crew, catering and maintenance.

The moves are designed to strengthen Virgin’s balance sheet, improve earnings and cash flow and support new opportunities for growth.

Virgin has been positioning itself as more of a full service competitor to Qantas. It has a target of 30% of domestic revenue from corporate and government travellers by the end of 2017.

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