Virgin Blue Holdings flying high

26th Aug 2010
Virgin Blue Holdings flying high

Virgin Blue Holdings (VBH) has seen stocks soar this morning following a return to profitability for financial 2010 and confirmation of a major linkup with Etihad Airways.

The agreement will see VBH’s international arm - V Australia - launch direct services to Abu Dhabi in 2011, with VBH and Etihad subsequently offering a joint network of more than 100 destinations.

In a statement to markets earlier today, VBH – the second largest airline in Australia – said net profit for the year to June 30th stood at A$21.3 million, compared with a loss of A$160 million a year earlier.

Profit before tax and exceptional items, which excludes the impact of fuel hedging, totalled A$31 million and fell within the airline’s May guidance of A$20 million to A$40 million.

VBH said profits were the result of a strong Australian domestic short-haul market, where revenue per available seat kilometre (RASK) had risen while costs had been falling.

“The increases in RASK and the continuing reduction in cost per available seat kilometre (CASK) form a strong basis for the development of our go-forward business platform,” said Virgin Blue managing director John Borghetti.

Following the announcement VBH rose 13 per cent to 31.5 Australian cents on the market, the biggest gain since August 13th 2009.


Etihad Airways

Also boosting VBH stock was confirmation of a linkup with United Arab Emirates flag-carrier Etihad Airways.

Subject to approval from Australian competition regulators, the two airlines plan to fly a total of 27 weekly services between the countries by 2012, with V Australia set to establish Abu Dhabi as a second international hub alongside Los Angeles.

Under the terms of the deal Virgin Blue hopes to access flights to Europe and increase its reach for selling tickets on services within Australia.

Virgin Blue managing director John Borghetti with Etihad chief executive James Hogan

“This is a real game changer and positions us as a truly global player,” added Mr Borghetti.

“Just as Virgin changed the game in domestic travel ten years ago and last year made huge impacts on the Pacific route, this agreement will bring real benefits for the travelling public.”

Virgin Blue will become the first Australian airline to serve the Middle East since 1991 when the partnership beings in October this year.

Etihad Airways itself was boosted earlier this year, scooping six World Travel Awards, including the coveted title as the region’s Leading Airline.

New Zealand

Earlier this week VBH confirmed it will cease domestic operations in New Zealand.

The airline’s Pacific Blue brand will redeploy its New Zealand-based planes on trans-Tasman and medium-haul international routes.

The carrier also announced plans to axe unprofitable flights to Johannesburg and Phuket, Thailand.

Virgin Blue will separately form a partnership with Air New Zealand in order to challenge Qantas Airway’s Jetstar budget carrier and Tiger Airways.

VBH operates the Virgin Blue brand alongside low-cost carriers Pacific Blue Airlines and Polynesian Blue and international carrier V Australia.


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