underlying net profit of 140.5 million

MEDIA RELEASE

VIRGIN BLUE ANNOUNCES UNDERLYING NET PROFIT
OF $140.5 MILLION

Tuesday 19 August 2008: Virgin Blue Holdings Limited today announced an underlying net profit after tax of
$140.5 million for the year ended 30 June, 2008. This result is in line with recent forecasts and has been achieved
in what has been generally acknowledged as a slowing economy and an unprecedented operating environment for
airlines globally.
The result excludes a $42.8 million after tax investment in new initiatives including the launch of VAustralia,
domestic services in New Zealand, the introduction of Embraer jet aircraft into operation, expansion of The Lounge
product and also the launch of the Premium Economy product in Australia.
While total revenue increased by 8.4% to $2,352 million, earnings per share fell 54.9% from 20.6 cents to 9.3 cents
primarily due to record high fuel costs putting pressure on margins. Despite the challenging operating environment,
revenue per available seat kilometre (RASK) increased to 10.09 cents for the year to 30 June 2008, compared with
10.02 cents for the previous reporting period, up 0.7%.
“With fuel costs at never before seen record highs for much of the year and airlines around the world struggling to
cope, this result is a testament to our team and business model,” said Virgin Blue Chief Executive Brett Godfrey.
“We have implemented a range of measures in recent months to mitigate the impact of increased fuel costs and we
will continue to closely monitor the operating environment and take whatever actions are necessary to see our way
through what is expected to be a challenging period.”
In June, Virgin Blue implemented a programme of strategies to mitigate the extraordinary cost of fuel including:
§ An increase in ticket prices by an average of $5 across approximately 55% of Australian domestic routes,
§ A 12% reduction in planned 2008/9 capacity growth via deferral of five committed Embraer aircraft deliveries
into 2010/11,
§ The redeployment of aircraft to trans-Tasman and Pacific routes, increasing frequencies and also launching
new services on uncontested routes,
§ A cost saving programme of an initial $50 million in the 2008-09 financial year,
§ Ceasing to operate direct services on some under-performing routes while at the same time not withdrawing
from any markets,
§ Implementing a salary freeze for all management positions for the 2008/9 fiscal year,
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§ The introduction of new baggage fees,
§ Significant fare reductions on baggage heavy leisure routes to preserve Virgin Blue’s commitment to air travel
affordability, and;
§ An increase in the airline’s Flexible Fares.
The summary financial results for the year are as follows:
Financial Highlights
12 months to 30 June
2008
12 months to 30 June
2007
Change
Revenue $2,352 million $2,169 million + 8.4%
EBITDAR $422 million $548 million - 23.0%
EBIT $168 million $324 million - 48.1%
Net Profit After Tax – Total business $98 million $216 million - 54.6%
New initiatives, after tax $43 million $6 million
Net Profit After Tax – Underlying business $141 million $222 million - 36.5%
RASK * - total revenue 10.09 cents 10.02 cents + 0.7%
CASK** - 737 operations 9.05 cents 8.53 cents + 6.1%
* RASK – Revenue per Available Seat Kilometre **CASK – Cost per Available Seat Kilometre
OPERATING PERFORMANCE
Production as measured by Available Seat Kilometres (ASKs) increased by 7.9% to 23.3 billion ASKs, compared to
the 12 months to 30 June 2007. Virgin Blue carried 16.7 million Guests, an increase of 9.2% on the previous year.
Revenue
Total revenue increased by 8.4% to $2.35 billion, with yield increasing by 0.2% to 11.59 cents. Revenue Passenger
Kilometres (RPKs) were 18.8 billion up 6.8% from the prior year. Load factor dipped slightly to 80.5%, down 0.65
pts on the same period in 2007.
Total revenue per available seat kilometre (RASK) which measures ticket price and passenger load movements
(quality of the revenue stream) increased 0.7% to 10.09 cents.
Expenditure
Total operating costs were $2.18 billion, up by 18.5% on the prior period reflecting the increase in production and
the ever present challenge of escalating fuel prices. During the period the average contract rate paid for jet fuel oil
increased by 17% to more than US$95 per barrel, pushing the total fuel bill for the period to $589 million.
The cost per available seat kilometre (CASK) of the 737 operation increased by 6.1% to 9.05 cents, including fuel
and the impact of a 2.7% decrease in the average sector length as a result of launching the domestic New Zealand
flying. This compares to the CASK for the Embraer which was over 20 cents for the period since launch, and which
management forecast will halve during the first full year of operation as the underlying operational efficiency of the
fleet is realised.
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Balance Sheet and Cash Flow
Capital expenditure for the period was $1 billion, principally for aircraft pre-delivery payments and other aeronautical
assets. Given the increase in fuel costs, average days operating cash reserves declined to 101 from 139 as at 30
June 2008, as cash balances decreased $100 million to $604 million.
Fuel and Currency Hedging
For FY09, over 72% of fuel requirements are covered principally using options, with crude oil price capped at
US$112 bbl. Further cover has been taken in FY10 against crude oil prices, with about 20% capped at US$124 per
barrel. Virgin Blue is 63% hedged for the company’s currency requirements for FY09.
Dividend
The Directors have determined that in light of the current economic environment and the outlook for the aviation
industry there will be no final dividend payment for the 2008 year. Dividends in relation to the 2009 financial year will
be considered in the context of industry conditions prevailing at the time.
Board
As previously announced, following completion of the in specie dividend distribution by Toll Holdings’ of its stake in
Virgin Blue, the Toll nominated Directors (Messrs Little, Ludeke, McInerney and Mallon) will resign from the Virgin
Blue Board. In addition, Mr Bob Watson has resigned as a Director. The current Chairman, Neil Chatfield, will
continue in his role until the Annual General Meeting.
Virgin Blue has formed a committee to nominate additional independent Non-Executive Directors and a new
Chairman. The new appointments are expected to be finalised by the Annual General Meeting to be held in
November.
OUTLOOK
The operating environment during the next 12 months is expected to be the most challenging the Virgin Blue group
- which now comprises Virgin Blue, Pacific Blue, Polynesian Blue and VAustralia - has experienced to date. We will
continue to adapt business operations accordingly.
Virgin Blue has significantly reduced planned capacity growth to bring it into line with expected operating
environment demand over the next two years. At the same time, we will seek to deploy aircraft to more profitable
routes or those where there is limited competition today. The group will focus on growing ancillary and value-add
revenue streams and will also closely monitor product positioning to ensure we remain relevant to all target
markets, including both the corporate and government sectors and our core leisure travellers.
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Our balance sheet remains strong and no additional equity funding is required. Plans for VAustralia remain on track
for a December 2008 launch. With approximately $40 million already invested and a further $55-$65 million of start
up costs forecast for the coming year, the total investment in VAustralia remains in line with previous guidance.
Key drivers for the rest of our business, namely capacity, demand and the cost of fuel remain highly volatile. Based
on current market conditions and fuel prices, a positive result for the current financial year is expected, but remains
a challenge.
Multi award winning airline Virgin Blue and international carriers Pacific Blue and Polynesian Blue currently operate a fleet of 68
modern Boeing 737 and Embraer E-Jet aircraft flying to 24 Australian and eight international destinations including New Zealand,
Fiji, Samoa, Tonga, Vanuatu and the Cook Islands. Virgin Blue was the first airline in the world to launch a Government-certified
carbon offset program, where Guests can offset the carbon emissions from their flights. Virgin Blue Group has also announced
plans to launch Australia's newest international airline, V Australia, set to commence flights between Australia and the USA from
late 2008, subject to regulatory approvals.
Further information: Heather Jeffery, General Manager Public Affairs 0412 922 122 [email protected]