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Cheaper Virgin Airfares Expected

Cheaper Virgin Airfares Expected
Virgin Blue Aircraft
(3.5) marks: 2

Virgin Blue Airfares are set to become even cheaper.

The Virgin airline group yesterday announced that it expects average airfares to drop by "over ten per cent".

However the airline was unable to say when travellers can expect to see the cheaper tickets.

After originally expecting a before tax profit of $40 million for 2009/2010, the budget airline has now revised that figure down to $20 million.

A recent weakening trend in the broader retail market has been compounded by a decline in consumer confidence and Virgin stated that these factors had affected the airlines profit figures.

"Since the guidance given earlier this month, we have continued to see rapid deterioration and increased volatility in the operating environment, particularly in respect of the leisure segment," Virgin said.

"The decline in demand has coincided with a period of increased industry capacity."

But despite the recent sharp downturn, Virgin said the short haul business was expected to make net profit before tax and exceptional items "in the order of $100 million" for the 2010 fiscal year.

In sighting the possibility of continuing retail market downturns, Virgin stated that they had the option of reducing aircraft held on lease arrangement.

"The company will continue to monitor market conditions and, should these prevail, we have flexibility to adjust capacity through lease returns,'' Virgin said.

The news comes at a time when Australian airlines are engaged in price wars in an attempt to woo travellers, a situation that looks set to continue, given recent market conditions.

Tiger Airways currently has a sale offering up to 50 per cent off selected domestic routes. Meanwhile Jetstar is offering fares from $39 and QantasLink seats are selling from $55.

The Virgin airline group is comprised of Virgin Blue, Pacific Blue, Polynesian Blue and V Australia.

Michael Palmer

Date: 28/05/2010

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