Virgin Australia follows Qantas into the red

John Borghetti, Virgin Australia Chief executive

A second Australian airline is in the red, one day after Qantas posted a $A252 million half year loss and announced the axing of 5000 jobs.

Virgin Australia has slumped to a first half loss of $A83.7 million but has made no announcements on possible job losses.

The result, for the six months to December 31, compares with a $A23 million net profit a year ago.

Virgin, which is largely owned by Sir Richard Branston and three other airlines including Air New Zealand, blames the decline in performance on a range of market conditions.

These include the effect of strong market capacity growth – a reference to Qantas trying to main its 60% market share by adding more seats – a “challenging trading and competitive environment, subdued consumer sentiment and economic uncertainty.”

It also cites the unrecovered $A27 million cost of the carbon tax.

Chief executive John Borghetti says despite the capacity growth, Virgin has increased its proportion of domestic revenue from the corporate and government market.

Virgin also outperforms Qantas on the key measures of growth in total group revenue, domestic yield, international yield and group revenue load factor, he says.

Revenue was up 6.4% to $A2.2 billion. Commenting on Qantas, Mr Borghetti says it should not be seeking a federal government guarantee on its debt.

Such a move is wrong, will discourage competition and the age of entitlement has to go, he says.

"Providing a financial facility to the detriment of the rest of the industry, as I hope our government and opposition agree, is wrong; two wrongs don't make a right," he says.

"It is not our place to tell government what to do, but any government or opposition should think very carefully before it decides to pick winners in an industry.

"Any distortions of fundamental free market dynamics will make new entrants think twice before coming to Australia."

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