Virgin Australia plunges into the red
SYDNEY (AFP) - Virgin Australia's key shareholders backed the airline with major loan commitments on Friday after the carrier plunged into the red as high fuel costs and intense competition led by Qantas hurt the bottom line.
The country's second-biggest airline after Qantas posted an annual net loss of Aus$98.1 million (US$87.5 million) in the 12 months to June 30, compared with a Aus$22.8 million profit in the previous corresponding period.
It sent its shareprice 3.70 percent lower to close at 39 cents.
The result was in contrast to its major rival, which announced Thursday it had bounced back into the black with a Aus$5 million profit over the same period following a Aus$245 million loss in the previous year.
Despite the disappointing numbers, Virgin won strong support from its three main shareholders, with Singapore Airlines, Air New Zealand and Etihad giving commitments Friday for unsecured loan facilities totalling Aus$90 million.
"I am very humbled by the fact that three of the world's biggest airlines believe in our strategy so much and support us," chief executive John Borghetti said.
"That's an amazing commitment from them."
Interest in Virgin Australia has intensified this year as carriers seek access to the nation's aviation market.
Qantas sealed a major alliance with Emirates to bolster its international business, prompting counter-manoeuvres from its rivals.
Air New Zealand boosted its stake in Virgin to 23 percent, making it the single largest shareholder while Singapore Airlines also bumped up its holding to 19.9 percent. Etihad has slowly increased its stake to 10.5 percent.
In addition to competition and soaring fuel prices, costs including a new ticketing system and Australia's carbon tax also hit the bottom line, Virgin said.
There were also significant transaction costs related to its acquisition of Skywest Airlines and the purchase of a 60 percent stake in Tigerair Australia.
Borghetti said while the results did not meet the airline's initial expectations, it had been a "pivotal year".
"We completed our major restructuring and transformation programme and reshaped the competitive landscape of the Australian aviation market, despite a very difficult economic environment and intense competition," he said.
No future guidance was provided given the uncertain economic times.
