Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — FY2011 Earnings Presentation
38 slides from Virgin Australia's earnings presentation, Aug 25, 2011
Slide 1: 2011 Full Year Results
2011 Full Year Results John Borghetti, CEO Sankar Narayan, CFO 25 August 2011
Slide 2: Introduction
Introduction • Full year results in line with guidance provided in March • Results influenced by unprecedented number of natural disasters and fuel price • Market conditions reinforce rationale for Game Change Program • Game Change Program ahead of schedule - Project milestones ahead of schedule – p
Slide 3: Financial highlights
Financial highlights • Results within guidance • Strong closing cash position of $731 million despite challenging operating environment • EBIT loss of $18.4* million impacted by one-off events • Year on year revenue growth in excess of 9% • Group Yield and RASK is stable notwithstanding one off even
Slide 4: Group Profit and Loss summary
Group Profit and Loss summary Year ended 30 June 2011 2011 2010 $m $m Revenue 3,271.0 2,981.8 Operating costs 3,248.9 2,874.7 Loss on sale PP&E 4.4 9.3 Unrealised foreign exchange losses 36.1 19.9 EBIT * (18.4) 77.9 Net interest costs 48.2 56.2 Underlying Profit / (Loss) before Tax * (66.6) 21.7 Ine
Slide 5: One off events
One off events Event 2011** Comment $m Queensland natural disasters* 50.0 • Floods and Cyclone Yasi Ash plume 7.0 • Impacted both Domestic and International network Christchurch earthquakes 15.0 • Impact on trans-Tasman network Restructuring and Navitaire costs 20.0 • Full settlement on Navitaire bu
Slide 6: Segment results
Segment results Year ended 30 June 2011 2011 2010 $m $m Segment EBIT* Domestic (40.8) 103.1 International 22.4 (25.2) Group EBIT* (18.4) 77.9 6 Note: * Excludes ineffective cashflow hedges and non-designated derivatives
Slide 7: Domestic Profit and Loss summary
Domestic Profit and Loss summary Year ended 30 June 2011 2011 2010 Variance $m $m % Revenue 2,402.0 2,341.6 +2.6% Operating Costs 2,442.8 2,238.5 +9.1% Segment EBIT* (40.8) 103.1 - ASKs (m) 22,215.8 21,148.6 +5.0% RASK (c) 9.31 9.39 -0.9% • RASK significantly impacted by one-off events 7 Note: * Exc
Slide 8: International Profit and Loss summary
International Profit and Loss summary Year ended 30 June 2011 2011 2010* Variance $m $m % Revenue 953.8 764.0 +24.8% Operating Costs 931.4 789.2 +18.0% Segment EBIT* 22.4 (25.2) - ASKs (m) 14,876.5 12,862.9 +15.7% RASK (c) 5.78 5.43 +6.4% 8 Note: * Excludes ineffective cashflow hedges and non-design
Slide 9: Cashflow summary
Cashflow summary AUD millions 2011 2010 $m $m Operating 213.5 369.2 Investing (285.4) (271.1) Financing 3.0 241.9 Net cash inflow/(outflow) (68.9) 340.0 Exchange rate changes (14.5) (1.2) Cash at 30 June* 731.3 814.7 9 Note: * A $70 million sale and leaseback of engineering spares was entered into p
Slide 10: Balance sheet
Balance sheet Year ended 30 June 2011 2011 2010 $m $m Cash and cash equivalents 731.3 814.7 Trade and other receivables 199.5 141.4 Property plant and equipment 2,754.9 2,753.9 Other assets 155.6 161.9 Total Assets 3,841.3 3,871.9 Trade and other payables 399.7 323.8 Interest bearing liabilities 1,6
Slide 11: Fleet – flexible and low fleet age (average 4.1 years in FY12)
Fleet – flexible and low fleet age (average 4.1 years in FY12) June 2010 June 2011 Deliveries Retirement / June 2013 lease return B737NG 62 63 25 (17) 71 B777-300ER 4 5 - - 5 E-170/190 21 23 1 (6) 18 A330-200 - 2 4 - 6 ATR - - 10 (2) 8 Total 87 93 40 (25) 108 • Exit of Embraer E170 fleet by Jan 2012
Slide 12: Capital and risk management
Capital and risk management • No final dividend • Committed financing for all fleet deliveries through to end of 2012 • Sale and leaseback program to further strengthen balance sheet Hedging policy and positions AUD Jet Fuel FY12 Operating requirements hedged 70% Participation in favourable rate / p
Slide 13: Review of Game Change strategic goals
Review of Game Change strategic goals Diversify Create Access revenue global growth line network markets Maintain Upgrade Invest our cost product & people advantage services No desire to be the biggest but want to be the domestic airline of choice 13
Slide 14: Target lower revenue volatility
Target lower revenue volatility Domestic airfares index (Mar 2002 – Aug 2011) Index 120 120 Business class 100 High yield* 100 80 80 60 Low yield* 60 Best discount 0 0 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Corporate and government segment is more resilient Note: Real
Slide 15: Progress to date: diversify revenue line
Progress to date: diversify revenue line • Corporate and government customers make Corporate & government High yield* fares up 13% of our total revenue, up from 10% in revenue growth revenue growth FY10 (FY10-FY11) (FY10-FY11) - Represents 29% year-on-year growth - High yield fare* revenue increased
Slide 16: Corporate accounts update
Corporate accounts update • Signed 39 new corporate accounts in FY11 with minimum Corporate account wins contract value of over $60m (annualised) (FY11) - New accounts include Accenture, Broadcast Australia, 21 Google*, Parmalat, Reed Group, AFL and NBN Co 18 - Contracted 4 additional ASX50 companie
Slide 17: Progress to date: create global network
Progress to date: create global network • Completed global network ahead of schedule - Implemented alliance with Etihad - Implemented alliance with Air New Zealand, in July 2011 - Gained approval for alliance with Delta, implementation by end of 2011 - Agreed codeshare with Hawaiian Airlines - Agree
Slide 18: Virgin Australia network: as at June 2010
Virgin Australia network: as at 30 June 2010 Virgin Australia Emirates Virgin Atlantic Delta* Bangkok Airways Virgin America Alaska* South African Airways Indianapolis Baltimore Columbus Philadelphia Cincinnati To / from LON Calgary Vancouver London Seattle Minneapolis Portland Toronto Ottawa Eugene
Slide 19: Virgin Australia network
Virgin Australia network Virgin Australia Hawaiian Virgin Atlantic Etihad Delta* Virgin America Air NZ** Singapore / Silk^ Indianapolis Detroit Columbus Philadelphia Cincinnati Baltimore Manchester Minsk To / from LON Dublin To / from AUH London Brussels Moscow Frankfurt Seattle Minneapolis Toronto
Slide 20: Growing international capacity share
Growing international capacity share Virgin Australia network* Oneworld** International capacity market share^ (Jul 2004 – Apr 2011) Forecast 40% JAL Malaysia 30% Singapore***; 20% Virgin Atlantic; Air NZ Hawaiian Delta 10% Etihad 0% Jul Jul Jul Jul Jul Jul Jul Jul Jul 04 05 06 07 08 09 10 11 12 Vir
Slide 21: Progress to date: access growth markets
Progress to date: access growth markets • Launched new services on important high yield domestic markets, with more services to follow - Trans-continental: Coast to Coast services - Canberra: Capital Connect services (from July 2011) • Expanded regional network - Implemented expanded Skywest codesha
Slide 22: Progress to date: maintain cost advantage
Progress to date: maintain cost advantage • Rationalised unprofitable routes (Johannesburg and domestic New Zealand) • Built global network through alliances with minimal capital expenditure • Optimised fleet operations and mix • Integrated operations into one • Introducing more fuel efficient ATRs
Slide 23: Progress to date: upgrade product and service
Progress to date: upgrade product and service • Launched new uniforms • Launched Airbus A330 product, including business class • Introduced premium direct Lounge entry – Sydney domestic airport • Unveiled new Boeing B737 business class and interior • Re-launched Virgin Australia Lounge – Melbourne a
Slide 24: Uniforms – Virgin Blue
\W australia Uniforms — Virgin Blue 24
Slide 25: Uniforms – Virgin Australia
Uniforms – Virgin Australia 25
Slide 26: Boeing 737 interior – Virgin Blue
Boeing 737 interior – Virgin Blue 26
Slide 27: Boeing 737 interior – Virgin Australia
Boeing 737 interior – Virgin Australia 27
Slide 28: Lounges – Virgin Blue
Lounges – Virgin Blue 28
Slide 29: Lounges – Virgin Australia
Lounges – Virgin Australia 29
Slide 30: Premium direct Lounge entry – Sydney
Premium direct Lounge entry – Sydney 30
Slide 31: Today – launch of new Virgin Australia Velocity Frequent Flyer Program
Today – launch of new Virgin Australia Velocity Frequent Flyer Program • Membership exceeds 2.5 million members – up 20% year on year • We have re-built the program from the ground up - Improved tier recognition and benefits, including new Platinum tier - Significantly enlarged global program (600+
Slide 32: Status match – limited time
Status match – limited time 32
Slide 33: Continued investment in our most important asset – our people
Continued investment in our most important asset – our people • Stable industrial relations platform – collaborative approach to industrial relations • Agreement with long haul international pilots and cabin crew • Committed to creating jobs in Australia • Continued investment and improvement in sta
Slide 34: Game Change Program scorecard
Game Change Program scorecard % completed Invest in our team Enhance in-flight and on-the-ground guest experience Develop comprehensive Ahead of global virtual network* schedule Integrate and align the airline operations Ahead of and brands schedule Maintain cost advantage and efficiencies Continuou
Slide 35: Still to come…
Still to come… Activity Timeline Turbo-prop fleet entry into service Prior to 31 October 2011 Full trans-continental J class launch Prior to 31 October 2011 Hawaiian Airlines codeshare Prior to 31 December 2011 Delta alliance implemented Prior to 31 December 2011 Mackay Lounge open Prior to 31 Decem
Slide 36: Game Change Program – a three year journey
Game Change Program – a three year journey Lead & leverage Reposition • Build upon strategic Plan & implement positioning in the • Conclude roll out of global airline Game Change market from • Formulate Game strategic plan and Change strategic strengthened begin benefits position in domestic plan an
Slide 37: Outlook
Outlook • Expect an improvement in underlying financial performance in FY12 despite uncertain economic environment • Unable to provide clear guidance for coming year • Early indications of improving earnings in FY12 - Positive trading results in July and continued strengthening in the corporate and
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Virgin Australia Holdings — FY2011 Earnings Presentation on 6ix