Virgin Blue hopes to break even after posting $195m loss

Photo / Getty Images

SYDNEY - Virgin Blue Holdings says it expects to break even this financial year after posting a full-year loss due to a decline in demand for travel and costs associated with V Australia.

Australia's second biggest airline reported a net loss of A$160 million ($195 million) for the year to June 30, in line with its forecast in July for a net loss of between A$160 million and A$165 million.

This compared to a net profit of A$98 million in the prior financial year.

Chief executive Brett Godfrey said the operating environment over the past year was one of the toughest the company had yet experienced. "While airlines have been variously impacted by the global economic crisis, our approach was to respond swiftly and definitively to softening domestic demand," he said.

Key strategies included a programme of cost saving and productivity initiatives, a headcount reduction, and redeployment of domestic capacity to short haul international routes.

Virgin Blue said it was confident it would be able to break even this financial year, with a positive group cash flow.

Virgin Blue's short haul operations contributed earnings of A$57 million to the group in 2008/09.

Cost saving initiatives during the year delivered some A$90 million savings across the business and the on-going programme is targeted to deliver A$150 million this financial year.

Virgin Blue said its capacity reduction this financial year would be about 5 per cent. Its long haul offshoot, V Australia, cost the airline A$74 million in start-up costs and costs related to foreign exchange in 2008/09.

In July, Virgin Blue raised A$231 million in an equity raising.

Sir Richard Branson's Virgin Group participated in the offering, which was priced at 20 cents per share, increasing its stake to around 30.2 per cent, from 25.5 per cent. Virgin Blue did not declare a final dividend, as previously flagged.

- AAP