Virgin Australia all about the bottom line after disappointing year
VIRGIN Australia’s chairman has spoken of the “widely shared disappointment” in the airline’s struggle to make a profit and improve its share price.
In 2015-16, the former budget carrier sank to a $224.7 million loss, and continued to struggle in the first quarter of this financial year, posting a $34.6 million loss.
Responding to a question from a disgruntled shareholder at the company’s annual general meeting in Brisbane, chair Elizabeth Bryan said none of the large shareholders — including Singapore Airlines and Etihad Airways — was happy with the results of recent years.
“The disappointment you express so courteously is widely shared among the large shareholders that we have represented on our board,” Ms Bryan said.
“None of the shareholders have been happy with the movement in the Virgin share price, neither has the board, neither has the Virgin management team.”
But she said Virgin Australia was still growing in a highly volatile environment.
“We’re an industry challenger to a much larger and an iconic Australian institution and being a challenger is always a precarious journey,” said Ms Bryan.
“And although we have weathered the last three years where we’ve had to fight for our right to exist that has of course taken its toll.”
Group CEO John Borghetti told shareholders the airline had embarked on a “Better Business Program” to deliver $300 million in savings by the end of 2019.
He said almost half of those savings would come from fleet restructuring, and “right-sizing” the organisation of about 10,000 people.
“I’m sure this time next year we’ll employ even more (people), but they may be in different jobs,” said Mr Borghetti.
“We’re going to operate Melbourne-Los Angeles, we’ll need people to fly that; we’re going to fly to Asia, and we’re going to need people up there.”
Although Australia’s long federal election campaign was blamed for damaging the domestic travel business, Mr Borghetti saw no such impact from the US election of Donald Trump.
“He’s not even in the job yet. No-one really knows what he’s going to do,” he said.
“You need to give him time as you do any new leader in any country.”
In any case, Mr Borghetti said the US would remain a major focus for Virgin Australia internationally, along with Asia, describing both continents as their “future”.
He hinted at the likelihood low cost partner Tigerair would fly more routes into Asia after launching Bali services this year.
And Virgin Australia would also begin non-stop flights from Sydney to either Beijing or Hong Kong next year, capitalising on massive growth in the Chinese visitor market.
Shareholders approved an increase in the number of board members from nine to 12, giving Virgin Australia a bigger bench of decision makers than Qantas or Telstra.
Newcomers included Nang Qi from Chinese conglomerate HNA, Dr Chien-tsung Lu of Nanshan Capital Holdings, and Marvin Tan from Singapore Airlines.
“We’re focusing on keeping the board independent, and to be independent you need more independent directors than shareholder-nominee directors,” Mr Borghetti said of the need for a bigger board.
“At the same time it brings global experience.”
Originally published as Virgin Australia’s year of disappointment