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Virgin posts loss, Velocity sold

Virgin Australia has sold 35% of its Velocity frequent flyer programme after posting a record statutory loss of $355.6 million, in what the airline’s CEO says was “one of them most difficult operating environments in the history of Australian aviation”.

Virgin Australia has sold 35% of its Velocity frequent flyer programme after posting a record statutory loss of $355.6 million, in what the airline’s CEO says was “one of them most difficult operating environments in the history of Australian aviation”.

The surprise sale of Velocity to private investment fund, Affinity Equity Partners, brings the value of the program to $960 million and increases the airline’s cash balance by $336 million. The program will remain under the Virgin Australia Group with a separate Velocity Frequent Flyer Board to lead the charge in its development.

Virgin CEO, John Borghetti said over the past four years the group has doubled membership to its FF program to 4.5 million and with the sale marking a “significant milestone as it validates the success of the Velocity Frequent Flyer business to date”.

The group reported a full-year underlying loss of $211.7 million impacted by “the confluence of excess market capacity, weak consumer sentiment, continued economic uncertainty and the $51.6 million cost of the carbon tax”, the airline stated.

The Group’s yield increased by 1.2%, however operating costs went up 3.4%. Virgin announced in its “Virgin Vision 2017” it plans to focus on other opportunities to drive yield enhancement by increasing its Corporate and Government domestic revenue mix by around 30% over the next 3 years.

“Now that we have completed the Game Change Program, this next period for us is about maximising the group’s potential, by extracting value from the business and generating sustainable profitability. To do this, we need to increase the growing customer loyalty to the Virgin Australia Group. That is what will assure our business of a stable future revenue stream and enable us to deliver sustainable profitability as the market recovers,” Mr Borghetti said, referring to “Virgin Vision 2017”.

Meanwhile, its combined shareholders, Air New Zealand Etihad and Singapore Airlines together helped the airline raise $350 million, while its stake in Tigerair Australia suffered a $46 million loss.

“We have transformed the business and our research indicates that we have now established Virgin Australia as the airline of choice. Therefore we can confidently say that “The Game’” has changed,” Mr Borghetti said in a statement on ASX this morning.

Virgin did not provide guidance for FY15, “given the uncertain economic environment”, however is on track and “well placed” to capitalise on market recovery, according to Mr Borghetti.