Tigerair permanently cancels Bali flights
Virgin Australia's budget airline Tigerair is pulling out of Bali permanently following a spat with the Indonesian authorities over whether it had permission to fly there, forcing the airline to refund the airfares of thousands of passengers who had booked tickets to the popular holiday destination.
Tigerair said on Friday it was cancelling flights to and from Bali, effective immediately, saying the route was no longer financially viable because the Indonesian authorities had asked it to go through a regulatory approval process that would have taken six months.
The move was a blow for Virgin Australia, which earlier reported a fall in second quarter earnings due to subdued demand for domestic air travel. Australia's second biggest carrier is expected to return to a profit this year as it pays down debt following a $1 billion capital injection from its big airline shareholders last year.
"Providing a reliable, low-cost service is critical for Tigerair Australia and our customers, and therefore our only option is to withdraw from flying to Bali altogether," Tigeair Australia chief executive Rob Sharp said.
Virgin paid $1 to take full control of loss-making Tigerair in 2014 when it acquired the 30 per cent it did not already own from Singapore-based Tiger Holdings. Virgin replaced some of its services on short-haul international routes with Tigerair aircraft.
Tigerair had hoped to resume Bali services this week after the Indonesian authorities forced it to ground flights in January without any notice, stranding hundreds of passengers. Tigerair has accused Indonesia of failing to honour an earlier agreement following a sudden decision in January to deny the airline permission to fly to and from Bali. Virgin Australia previously operated the flights from Melbourne, Adelaide and Perth which were replaced with Tigerair services in March.
It is believed Indonesia on Thursday asked the airline to obtain a separate Air Operator's certificate to fly on the route which would take at least six months.The aircraft can now be deployed on alternative routes. The decision impacts an estimated 50,000 passengers who had booked flights over the next six months with Tigerair to Bali but the impact on Virgin's overall operations is manageable as the airline as a whole currently flies about 50,000 passengers a day.
Virgin on Friday posted a $13.1 million net profit in the second quarter. Its underlying profit, excluding one-offs, was $45.9 million which was well down on the $73 million underling profit it posted in the same quarter a year ago.
Virgin, which raised $1 billion in capital from its big Chinese and global aviation shareholders last year, said it had reduced net debt by $936.3 million in the quarter and its cash balance at Dec. 31 was $1.6 billion, up $689.1 million. Investors had raised concerns about the airline's deteriorating cash position last year.
