Virgin Blue Posts $100m Loss

[Brad Myer]

http://www.news.com.au/heraldsun/sto...005961,00.html

BUDGET airline Virgin Blue reported a first-half net loss of $101.4 million as the company took charges for investment in trans-Pacific partner V Australia and reversals of currency and fuel hedges.

The airline's net loss for the six months to December 31, 2008 compared with the net profit of $113.3 million reported for the same period the year before, the Brisbane-based company said in a statement on Monday.

Virgin said it won't pay a first-half dividend.

Revenue for the first half grew 12 per cent to $1.35 billion.

Virgin (vba.ASX:Quote,News) said its underlying net profit before tax of $60 million for the first half of 2008/09 was in line with consensus estimates and "a creditable performance amongst airlines globally, despite an extremely tough operating environment."

The result excludes a non-recurring $60.6 million after tax investment in V Australia (including a $42 million unrealised foreign exchange loss) and an $80.8 million after tax expense relating to the mark to market of ineffective fuel and currency hedges.

Virgin Blue Airlines Group chief executive Brett Godfrey said the underlying business was resilient.

"Our underlying business remained resilient despite an exceptionally challenging and historically unprecedented operating environment," Mr Godfrey said.

The board said the current outlook for the rest of the financial year remained challenging.

"However no change in guidance, last given at the company's November 2008 AGM (annual general meeting), is required at this time.

"The softening demand and other factors contribute to this being the most volatile operating environment in the history of commercial aviation, Australia included, with domestic fares at 17 year lows and yield impacted accordingly."

[Michael Morrison]

Given most of that loss is to do with FOREX and the hedges, I don't think it is all that bad.

Even if the losses continued at this rate (which they shouldnt given the cost of fuel and forex) then they would still have at least 2 years of flying.

Also if you take away the liabilities from the assetts they would have a positive result of $604M.

[NickN]

It's one of those results which sounds bad but is really quite acceptable. Given the V Australia associated costs and the AU Dollar/Hedging losses, should only be a once-off loss. I think you'll find the results for the next half to be alot better.

On a side note, good time to buy into DJ shares right now! They should see modest gains over the next 12-24 months.

[Marty H]

Originally Posted by Michael Morrison

Given most of that loss is to do with FOREX and the hedges, I don't think it is all that bad.

Even if the losses continued at this rate (which they shouldnt given the cost of fuel and forex) then they would still have at least 2 years of flying.

Also if you take away the liabilities from the assetts they would have a positive result of $604M.

Revenue was up 12% which is a good indicator, they will with the grounding of five aircraft will find a way to claw back the $100M loss, the company is way way undervalued its beyond belief, still cant deny it will be a tough 12-18mths going forward.

I hope we dont fly until the 'money runs out' I would hope strategies would be put in place to stem the losses.

[Ricky T]

Originally Posted by Marty H

Revenue was up 12% which is a good indicator, they will with the grounding of five aircraft will find a way to claw back the $100M loss, the company is way way undervalued its beyond belief, still cant deny it will be a tough 12-18mths going forward.

Marty, there is no need to worry about finding 'a way to claw back the $100M loss'. As NickN has pointed out, most are one-off items/expenses and the losses on hedges and forex are only accounting loss (ie on paper).

Stripping out the two one-off items, and you would notice the underlying net profit is not too bad.

[Marty H]

Originally Posted by Ricky T

Marty, there is no need to worry about finding 'a way to claw back the $100M loss'. As NickN has pointed out, most are one-off items/expenses and the losses on hedges and forex are only accounting loss (ie on paper).

Stripping out the two one-off items, and you would notice the underlying net profit is not too bad.

Yes I agree also a couple of other things is that the $8 baggage charge didnt start until halfway through the first half of the financial year, now myself Im doing a tally of how many bags I load, I started on Jan 1 Im currently upto just over 4000 and we havent even finished Feb yet so on track for around 25000 bags for the year x that by $8 and that's $200K right there in revenue.

[Craig Murray]

Originally Posted by Marty H

on track for around 25000 bags for the year x that by $8 and that's $200K right there in revenue.

Now, we deduct from that those passengers that booked well in advance and prior to the baggage charge coming into effect (thus avoiding it), we also deduct people travelling on Flexible, Corporate Plus and Premium Economy fares as they can take bags at no charge.

So, tell us......... what percentage of passengers are utilising the above fare grades?

I don't think any of us seriously think DJ is going to run out of funds, return/sell aircraft and depart Australia with their tail between their legs.

Let's not focus too much on the word "loss" as loss isn't always loss (if that makes sense!?).

[Marty H]

Originally Posted by Craig Murray

Now, we deduct from that those passengers that booked well in advance and prior to the baggage charge coming into effect (thus avoiding it), we also deduct people travelling on Flexible, Corporate Plus and Premium Economy fares as they can take bags at no charge.

So, tell us......... what percentage of passengers are utilising the above fare grades?

I don't think any of us seriously think DJ is going to run out of funds, return/sell aircraft and depart Australia with their tail between their legs.

Let's not focus too much on the word "loss" as loss isn't always loss (if that makes sense!?).

According to so info yesterday it was actually a $60M pre tax profit for the first half

In the figure I was just using the $8 online charge because realistically you also dont know how many pax are also checking in a bag without pre-paying and therefore paying $20.