SINGAPORE: Virgin Australia Holdings, the country’s second-biggest airline, reported a smaller-than-expected annual loss and said its outlook had brightened with a surge in business confidence driving up corporate traffic.
In positive signs not only for Virgin but also larger rival Qantas Airways, Virgin CEO John Borghetti said the corporate market had improved in the fourth quarter ended June and the momentum was continuing in the current quarter.
A measure of Australian business conditions hit its highest since early 2008 in July as sales and profits stayed strong, while firms turned more confident the purple patch would last for some time yet.
“Business travel seems to have picked up more than leisure travel,” Borghetti told reporters. He said yields, a measure of ticket prices, were improving as a result.
Business travel tends to be more lucrative than leisure travel because of the higher ticket prices typically charged for bookings made closer to the flight date.
Virgin reported an underlying annual loss before tax of 3.7 million Australian dollars ($2.92 million), versus an average forecast for a 22 million Australian dollars loss from five analysts polled by Thomson Reuters.
The statutory net loss after tax for the year to June 30 was 185.8 million Australian dollars, versus a 224.7 million Australian dollars loss a year ago.
Virgin shares jumped 5.7 percent to close at an eight-week high, while the broader market eased 0.1 percent.
Qantas shares closed 2.5 percent higher, with Citi analysts saying the Virgin results were encouraging for the strength of the domestic market.
“We expect the domestic duopoly will likely continue with rational capacity management as well as fare increases over the next 12 months,” the analysts said in a note to clients.
Borghetti said Virgin, partly owned by British entrepreneur Richard Branson, was ahead of schedule on its cost-cutting program and was increasing its targeted savings by 50 million Australian dollars, to 350 million Australian dollars a year.
While business confidence is strong, Australian consumer sentiment slipped to its lowest rate in more than a year in August as worries over family finances swamped increasing optimism about the economic outlook.
Virgin and Qantas have cut capacity in response to weak domestic demand, while also adding routes to the lucrative China market.
Last month, the International Monetary Fund (IMF) revised up its economic growth forecast for China on expectations Beijing would maintain high levels of public investment.
In a separate statement, Virgin said it had received authorization from the Australian Competition and Consumer Commission for its alliance with HNA Aviation, Hong Kong Airlines and HK Express for a five-year term.
Virgin began flying from Melbourne to Hong Kong last month and plans to add routes to mainland China.