Massive hit to Virgin Blue profit forecast
Thursday, 28 May, 2010
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Virgin Blue said today that the Group now estimates its Net Profit before Tax and Exceptional Items for the 2010 financial year will be in the range of $20-40 million, compared to previous guidance of $80 million.
A spokeswoman said that the Company had continued to see rapid
deterioration and increased volatility in the operating environment, particularly in respect of the leisure segment both domestically and internationally. This, she said, is consistent with the weakening trend seen recently in the broader retail market as well as an unexpected and sudden decline in consumer confidence in the last
month. The decline in demand has coincided with a period of increased industry capacity.
The statement went on to say that average fares are expected to decrease by over 10%, in line with the trend seen in the recent BITRE data for discount economy fares. Despite the sharp downturn, the short haul business is still expected to make a net profit before tax and exceptional items in the order of $100 million.
The Company will continue to monitor market conditions and its
focus on cost control will continue, with Cost per Available Seat
Kilometre (excluding fuel) expected to show a further decrease over that achieved in the first half.
The profit before tax and exceptional items guidance excludes any adjustments in respect of hedging ineffectiveness. Based on current market conditions and volatility, the Company would expect a credit in respect of this item for the full year
Virgin Blue has downgraded its profit outlook for the financial year ending 30 June, with the carrier saying it now expects net profit before tax to be between $20 and $40 million, compared to $80m forecast previously.
Philip Thorniley
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