A day after rival Qantas revealed a record loss, Virgin Australia has highlighted the tough and competitive state of the Aussie airline industry revealing a statutory loss after tax of $355.6 million.
And unlike Qantas, which has rejected selling a stake in its lucrative loyalty program, Virgin also announced it was selling a 35% stake in its Velocity program to Affinity Equity Partners and also plans to enter the freight sector next year.
The loss came against total group revenue of $4.306 billion, up 7.1% on the previous year, but CEO John Borghetti said it came in tough conditions with the airline declining to offer guidance for the 2015 financial year.
“The 2014 financial year has seen one of the most difficult operating environments in the history of Australian Aviation,” Borghetti said.
“While the Virgin Australia Group performed well in attracting high yielding passengers and containing cost growth over the full year, underlying revenue performance was impacted by the challenging operating conditions.
“Notwithstanding these conditions, it was important for Virgin Australia Group to complete the Game Change Program Strategy and strengthen our balance sheet in order to deliver sustainable returns for shareholders over the long term.”
As part of the Game Change Program, targeting lucrative government and business markets traditionally dominated by Qantas, Virgin said the corporate and government market now represented more than 25% of its domestic market.
Virgin has also focused on driving loyalty, with membership of its Velocity Frequent Flyer doubling over the last four years to 4.5 million – still less than half of Qantas's membership of more than 10 million.
Borghetti said it would target a membership base of more than seven million within the next three years.
Under its newly revealed Virgin Vision 2017 program, Virgin said it would enter the freight sector in 2015, as well as expand its charter operations.
Borghetti said the state of the market made it impossible to offer forward guidance.
“Given the uncertain economic environment we are unable top provide economic guidance for the 2015 financial year at this time and we will not be providing guidance on capacity growth going forward,” Borghetti said.
“However, the Virgin Vision to 2017 sets out a comprehensive plan of initiatives that will see us deliver a sustainable, profitable business over the long term.
“While the current economic environment remains challenging, the Virgin Group has significantly enhanced its strategic position over the last four years and is well placed to capitalise on market recovery.”
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