The Virgin Australia Holdings Ltd (ASX: VAH) share price has plummeted 9% in morning trade after the airline announced 750 job cuts amid a soft full-year earnings result.
What did Virgin Australia announce this morning?
For the year ended 30 June 2019 (FY19), Virgin reported an underlying loss before tax of $71.2 million as the airline felt the impact of adverse market conditions in the second half of the year and $158.8 million in fuel and currency hedging losses.
The statutory numbers were even worse for Virgin, reporting a $315.4 million loss which included significant restructuring costs and a non-cash impairment of its Tigerair and VA International segments.
Following an operational review, Virgin reported a $152.6 million non-cash impairment of the Virgin Australia International assets and Tigerair businesses in FY19.
Total revenue came in at $5.8 billion, up 7.6% on the prior corresponding period (pcp), despite the deteriorating trade conditions, while the group did report positive free cash flow of $53.9 million despite its hedging losses.
One positive was a 2.1% increase in revenue per available seat kilometre (RASK) during the year, while Virgin noted the timing of Easter and the Federal Election as factors behind the softening corporate and leisure travel sectors.
However, Virgin’s group cost per available seat kilometre (CASK) climbed 4.0% higher on pcp, excluding the fuel and foreign exchange losses, while a 10.7% increase in depreciation expenses also lowered group profitability.
What did management have to say?
CEO and Managing Director Paul Scurrah said the results were disappointing and underscored the need for change at Virgin.
While citing a low Australian dollar, high fuel costs and subdued trading conditions, Mr. Scurrah said that the company must improve its financial performance and focus on cost-cutting, including a 750 workforce reduction and review of all supplier contracts.
Virgin’s restructuring announcement
On top of this morning’s disappointing result, Virgin made a separate announcement to the market regarding an update to its corporate structure.
The company announced a new “Executive Leadership Team” including a new Chief Financial Officer, Chief Operations Officer and Chief Commercial Officer.
Virgin also hopes to see cost savings of $75 million from the 750 job cuts, but investors haven’t been convinced about the turnaround prospects, which has sent the Virgin share price tumbling 9% lower this morning.
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