Virgin Profit Up, Share Price Down

Virgin Australia yesterday announced its strongest half-year net profit since 2010 at $62.5m for the six months to Dec 30, a turnaround of $110.3m over the previous corresponding period.

But investors were left wanting more and sent the carrier’s share price down by 6%.

Domestic performed strongly with Virgin fares increasing by an average of 9.1%.

The turnaround at low cost subsidiary Tigerair continued with the average ticket price growing by 12%.

International took a hit of almost $20m from the chaos caused by incessant Bali volcanic activity although Virgin says this division is “building momentum”.

Meanwhile, the International Aur Transport Association Reports:

  • Worldwide airline share prices fell by 10% in January, alongside widespread sell-offs in global financial markets;
  • Airline financial results from Q4 2015 point to a strong end to 2015, with strong improvements in North America and Europe. Weakness on the cargo side means that Asia Pacific airlines saw the smallest improvements;
  • Crude oil prices dropped to a 12-year low during January, reflecting a combination of heightened concerns over excess supply in the market and signs of weakness on the demand side too. If sustained, the most recent declines in oil prices would reduce the industry’s annual fuel bill by approximately $12 billion in 2016;
  • After adjusting for the distortionary impacts from the rise in the US dollar over the past 18 months or so, global air fares fell by around 5% in annual terms in 2015. Recent falls in oil prices mean that further falls in air fares are likely to be seen in 2016 as hedging contracts unwind, which will help to stimulate demand over the year;
  • Passenger traffic in 2015 enjoyed its strongest growth in five years. The passenger load factor averaged a record high over the year, which alongside a lower breakeven load factor, helped to drive strong financial performance;
  • By contrast, the cargo side of the business had a fitful year, with volumes ending the year just 0.5% higher than they started it. The freight load factor has settled at a six-year low, keeping intense pressure on cargo yields.
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