The cost of restructure and cost-cutting is expected to hit Virgin Australia’s full-year finances by some $450 million, according to the airline.
The one-off loss was revealed by the airline in an investor update on ASX, weeks after the carrier found investors to replace the loss of its major shareholder, Air New Zealand.
The carrier said around $100 million will be put towards restructuring and $175 million in non-cash balance sheet impairments from its three-year Better Business program. These charges along with other restructuring charges recorded during the year will reach between $410-$450 million.
Despite the costs, Virgin says it is still expecting its full-year 2015/16 results to stay in the green, between $30 million to $60 million. This is an increase of $79 million-$109million on the prior 12 months.
The remainder of the cash restructuring costs and non-cash balance sheet impairments associated with Better Business are expected to be recognised in future periods to 30 June 2019.
As part of the restructure, the airline revealed last month that it would sell off its fleet of E190 aircraft over the next three years. Additionally, it will reduce its ATR planes. This will help save on fuel and crew costs as well as cut expense on maintenance, The Australian reported.
The airline said it will also attempt to sell off the Airbus A320s, which are currently being used by its budget airline, Tigerair. These aircraft will be replaced with Boeing 737-800s from the Virgin fleet.
In total, the carrier expects sale of aircraft along with improved earnings and cash flow to help raise some $852 million.
Meanwhile, Virgin plans on tapping into the growing China market with its first direct services to Hong Kong and Beijing. Flights will be operated alongside its newest shareholder, HNA Aviation.