VIRGIN AUSTRALIA POSTS ANOTHER LOSS BUT SAYS BLUE SKIES ARE UP AHEAD

Virgin Australia (ASX: VAH) shares have surged nearly six per cent to a four-week high of $0.185 after the airline announced better-than-expected results after a strong improvement in the fourth quarter of 2016-17.

Virgin reported a $220.3 million statutory after-tax annual loss, due largely to a subdued market for domestic and corporate travel, which was an improvement of $39 million on the previous year.

Its underlying earnings, excluding impairment charges and other costs, recorded a loss of $3.7 million compared to a $41 million profit last year. Analysts were expecting a loss of $18 million in underlying earnings.

The company says the improved position was down to positive results from a major restructuring program called Better Business which is designed to cut costs and improve cash flow.

Revenue rose by 0.5 per cent to $5 billion while net debt has been reduced by $839 million.

"The group's underlying performance for the 2017 financial year was affected by subdued domestic trading conditions and the impact of fleet simplification," Virgin Australia CEO John Borghetti says.

"The group's statutory result was impacted by restructuring charges predominately from the Better Business program. While there are upfront costs associated with implementing the program, it will deliver significant long-term cash flow savings," Borghetti says.

The company says there was a fall in earnings from its domestic business and changes to its aircraft fleet had also hit its bottom line, but pointed to a strong fourth quarter for Australia's second largest carrier.

"Virgin Australia Domestic's performance was impacted by subdued trading conditions including reduced demand for regional travel and for corporate travel," Borghetti says.

"We managed capacity prudently in response to these conditions, with sectors flown declining by 5.9 per cent on the prior financial year."

TigerAir Australia business posted an underlying EBIT loss of $24.3 million as the impact of its withdrawal of operations to Bali outweighed an improved performance on domestic routes.

Virgin Australia's international business returned to profit, with underlying earnings of $500,000, after the company stopped its loss-making flights to Abu Dhabi and made improvements to its business class.

Business News Australia