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Virgin Blue has announced that its net profit for 2007/08 plummeted nearly 55 per cent amid volatile fuel prices and demand, and the carrier sees a bumpy road ahead.
The fuel price-hit airline has managed to increase its total revenue by 8.4 per cent to $2,352 million, but its net profit fell 54.7 per cent to $97.7 million.
“The operating environment during the next 12 months is expected to be the most challenging the Virgin Blue group has experienced to date. We will continue to adapt business operations accordingly,” it said.
The group, which now comprises Virgin Blue, Pacific Blue, Polynesian Blue and VAustralia, has significantly cut planned capacity growth over the next two years to focus on more profitable routes.
It said over 72 per cent of its fuel costs for the next fiscal year had been covered through options, with crude oil prices capped at USD 112 per barrel.
“Key drivers for the rest of our business, namely capacity, demand and the cost of fuel remain highly volatile. Based on current market conditions and fuel prices, a positive result for the current financial year is expected, but remains a challenge,” it said.
Chief executive Brett Godfrey said despite the bleak outlook for the aviation industry, the carrier’s two key business divisions, Pacific Blue and Virgin Blue, would continue to yield profits.
The company’s balance sheet is still strong with no additional equity funding needed, he said, and plans for its long-haul brand VAustralia remain on track for a December 2008 launch.
“With approximately $40 million already invested and a further $55-65 million of start up costs forecast for the coming year, the total investment in VAustralia remains in line with previous guidance,” the company said.
“We will continue to closely monitor the operating environment and take whatever actions necessary to see our way through what is expected to be a challenging period,” Mr Godfrey said.
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