Wednesday 09 November 2016 10:23 AM
Virgin folds NZ accounts into Aussie parent as revenues fall
By Fiona Rotherham
Nov. 9 (BusinessDesk) - Financial results from the New Zealand end of Virgin Australia’s trans-Tasman operations are no
longer being reported separately although its annual group accounts show revenue from New Zealand falling markedly in
the 2016 financial year.
During the 2016 financial year, Virgin Australia Airlines (NZ) transferred all its assets, liabilities, rights and
obligations to its parent, Australia’s second-largest airline.
A remaining $2.15 million liability from the New Zealand arm was forgiven under the agreement. Financial accounts for
VAA (NZ) were still prepared on a going concern basis although the only separately reported numbers this year were
auditor costs and share capital and reserves. Last year the New Zealand subsidiary reported a $98,000 net loss on
revenue of $194 million.
VAA (NZ)’s operations are now included under the group’s International division in its consolidated accounts. In the
group’s full-year accounts to the end of June 2016, passenger and other service revenue from inbound and outbound
services between Australia and New Zealand fell to A$154.7 million from A$218.2 million the prior year. That’s shifted
New Zealand from the second highest revenue earner by market, behind Australia, to last place, although a number of
countries are lumped under ‘other’.
An airline spokesman said that figure only recorded revenue that could be directly tracked from New Zealand and didn’t
reflect trans-Tasman revenue as it omits bookings to New Zealand from Australia. It also said the figure wasn’t 100
percent reliable.
Full-year accounts for Virgin Australia (NZ) Employment and Crewing, which provides crew for Virgin’s transTasman
flights, show revenue of just under $50 million, on par with the previous year. Net income was $10,000 attributable to
its parent, while accumulated losses were $40,000.
Virgin Australia last week reported an underlying loss before tax of A$34.6 million for the first quarter of the 2017
financial year, blaming subdued industry trading conditions, particularly in the domestic market. The result includes
the impact of restructuring charges.
Domestic revenue fell 3.9 percent to A$4.28 billion while its international division, which now includes New Zealand,
increased by 8.6 percent to A$706 million. Load factor was unchanged at 84.8 percent.
Air New Zealand divested its stake in Virgin Australia during the year, mainly to Chinese company Nanshan Group, while
continuing its long-standing codeshare alliance with the Australian airline on the trans-Tasman network. The A$67.5
million sale in October of its remaining 2.5 percent stake, which had been diluted from 6 percent due to Virgin’s
private placement with HNA Innovation in June, will show up as a gain on sale in the New Zealand airline's 2017 results.
That will partly offset the $86 million loss on the divestment recorded in the 2016 results.
Air New Zealand remains the largest player in the trans-Tasman market, though a growing number of carriers and increased
capacity has whittled its market share to around 35 percent, despite passenger growth, and competition has lowered air
fares.
Air NZ’s accounts show passengers carried on the Tasman and Pacific Islands routes gained 3.15 percent during the June
2016 financial year while passenger revenue per available seat kilometres fell 1.1 percent to 9.9 cents. An analysis of
revenue by geographic region at point of sale showed Australia and the Pacific Islands at $619 million, down $20 million
on the prior year. It said it expected competitive pressures on the routes to continue in 2017.
(BusinessDesk)
ends