Virgin Australia Sees A$110 Million Loss on Ticket System

Virgin Australia Holdings Ltd. (VAH) cut its full-year earnings forecast for the second time since May and predicted a loss of as much as A$110 million ($98 million) on costs from a new ticket-booking system.

Costs including moving to the Sabre ticketing system will total A$100 million, including A$36 million already announced at first-half results in February, the Brisbane-based company said in a statement today. Shares of Australia’s second-largest carrier fell the most in six weeks.

The carrier has been adding flights and keeping ticket prices low as it attempts to take on Qantas (QAN) Airways Ltd.’s 65 percent share of Australia’s domestic market through takeovers of smaller airlines. Virgin was projected to post net income of A$21 million in the year ended June, according to the average of eight analysts’ estimates compiled by Bloomberg before today’s announcement.

“Aviation’s a tough game,” Chief Executive Officer John Borghetti said on a conference call. The market was “soft” from April through June, he said. “Leisure, in particular, needed a lot of stimulating to get people to put their hands in their pocket” because of the weak economic conditions.

Virgin fell 4.4 percent, the most since June 24, to 43.5 Australian cents at the close in Sydney trading. The stock has advanced 3.6 percent this year, lagging behind the 9.9 percent climb of the benchmark S&P/ASX 200 Index

Net Loss

Virgin’s net loss will be in the range of A$95 million to A$110 million, while the loss before tax and one-time items will be A$30 million to A$50 million, the company said.

Backed by major shareholders Singapore Airlines Ltd. (SIA), Air New Zealand Ltd., and Etihad Airways PJSC, the airline has bought rural carrier Skywest and a 60 percent stake in Tiger Airways Holdings Ltd. (TGR)’s loss-making local unit to compete with Qantas’s presence in the regional and budget markets.

Yield, a measure of ticket prices, increased in June compared to a year earlier, and the proportion of seats filled rose to 74 percent from 69 percent the previous month, the carrier said. Local capacity growth in the six months through December will be in the range of 3 percent to 4 percent.

Carbon pricing probably also cost as much as A$50 million, which the airline wasn’t able to recover in higher ticket prices because of competition and weak demand, it said.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.