Virgin Australia's earnings performance on the highly competitive trans-Tasman route has improved from loss-making to a profit as a result of accounting policy changes and other benefits from its alliance with Air New Zealand.
The Australian airline's New Zealand operations posted a $31 million profit in the year ending June 30, compared to a loss of $9 million the year before, according to accounts for Virgin Australia Airlines (NZ) Ltd filed with the Companies Office. Revenue rose $1.86 million to $274 million. Most of Virgin New Zealand's revenue comes from operating aircraft on trans-Tasman routes for its Australian parent.
The bottom-line earnings reflect changes to Virgin's accounting policies after two of its largest shareholders, Air New Zealand and Singapore Airlines, began recording a part of the profits or losses from Virgin in their own accounts. In October, the parent company,Virgin Australia, reported an underlying loss before tax of A$45 million for the first quarter of the 2015 financial year, historically a seasonally weaker period for the airline. It was an 18.3 percent improvement over the quarter ending Sept. 30 the previous year.
The trans-Tasman market is dominated by two major alliances - Air New Zealand-Virgin and Qantas-Emirates. Figures presented to the Australian competition regulator, the Australian Competition and Consumer Commission, last year showed Air NZ-Virgin had a joint share of 57 percent of the market compared to 39 percent for Qantas-Emirates. Qantas-Emirates had lost 3.3 percent market share in the previous four-year period.
Market regulators last year gave approval to extend the Air New Zealand-Virgin Alliance for a further five years, with some conditions remaining around maintaining competition on certain key routes.