2011 Full Year Results

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1 2011 Full Year Results John Borghetti, CEO Sankar Narayan, CFO 25 August 2011

2 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 product, fleet, network, brand and Velocity - Positive feedback driving corporate market share wins Game Change Program transformation to continue in FY12 and to begin to deliver significant benefits Re-positioning will ensure business can operate in a high fuel cost environment and withstand unanticipated events 2

3 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 events affecting revenues Underlying CASK growth (excluding fuel) below inflation International network is EBIT positive at $22.4 million Statutory loss after tax $67.8 million Note: * Excludes ineffective cash flow hedges and non-designated derivatives 3

4 Group Profit and Loss summary Year ended 30 June $m 2010 $m Revenue 3, ,981.8 Operating costs 3, ,874.7 Loss on sale PP&E Unrealised foreign exchange losses EBIT * (18.4) 77.9 Net interest costs Underlying Profit / (Loss) before Tax * (66.6) 21.7 Ineffective cashflow hedges and non designated derivatives (28.2) 12.6 Income tax (expense) / benefit 27.0 (13.0) Statutory Profit / (Loss) after Tax (67.8) 21.3 Note: * Excludes Ineffective cashflow hedges and non designated derivatives 4

5 One off events Event 2011** $m Comment 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 but timing difference on P&L recognition Network restructure and market exit costs Total 92.0 Note: * Excludes leisure softening following Queensland natural disasters; ** Based on internal estimates 5

6 Segment results Year ended 30 June $m Segment EBIT* 2010 $m Domestic (40.8) International 22.4 (25.2) Group EBIT* (18.4) 77.9 Note: * Excludes ineffective cashflow hedges and non-designated derivatives 6

7 Domestic Profit and Loss summary Year ended 30 June $m 2010 $m Variance % Revenue 2, ,341.6 Operating Costs 2, ,238.5 Segment EBIT* (40.8) % +9.1% - ASKs (m) 22, ,148.6 RASK (c) % -0.9% RASK significantly impacted by one-off events Note: * Excludes ineffective cashflow hedges and non-designated derivatives 7

8 International Profit and Loss summary Year ended 30 June $m 2010* $m Variance % Revenue Operating Costs Segment EBIT* 22.4 (25.2) +24.8% +18.0% - ASKs (m) 14, ,862.9 RASK (c) % +6.4% Note: * Excludes ineffective cashflow hedges and non-designated derivatives 8

9 Cashflow summary AUD millions 2011 $m 2010 $m Operating Investing (285.4) (271.1) Financing Net cash inflow/(outflow) (68.9) Exchange rate changes (14.5) (1.2) Cash at 30 June* Note: * A $70 million sale and leaseback of engineering spares was entered into post 30-June

10 Balance sheet Year ended 30 June $m 2010 $m Cash and cash equivalents Trade and other receivables Property plant and equipment 2, ,753.9 Other assets Total Assets 3, ,871.9 Trade and other payables Interest bearing liabilities 1, ,787.8 Unearned revenue Other liabilities Total Liabilities 2, ,938.6 Net Assets NTA per share* $0.39 $ Note: * Net tangible asset backing per ordinary share

11 Fleet flexible and low fleet age (average 4.1 years in FY12) June 2010 June 2011 Deliveries Retirement / lease return June 2013 B737NG (17) 71 B ER E-170/ (6) 18 A ATR (2) 8 Total (25) 108 Exit of Embraer E170 fleet by Jan 2012 Note: Figures up to end of FY12 firm deliveries only and excludes additional options of rights to purchase 11

12 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 / price movements 76% Effective rate AUD 104 per barrel 12

13 Review of Game Change strategic goals Diversify revenue line Create global network Access growth markets Maintain cost advantage Upgrade product & services Invest our people No desire to be the biggest but want to be the domestic airline of choice 13

14 Target lower revenue volatility Domestic airfares index (Mar 2002 Aug 2011) Index High yield* Business class 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 13 month moving average, indexed to March 2002; * High yield comprises business class and full economy, low yield comprises restricted economy and best discount Source: Bureau of Infrastructure, Transport and Regional Economics (BITRE) 14

15 Progress to date: diversify revenue line Corporate and government customers make up 13% of our total revenue, up from 10% in FY10 - Represents 29% year-on-year growth - High yield fare* revenue increased by 13% year-on-year Early benefits realised in H2 FY11 - High yield fare* revenue increased by over 25% pcp - Corporate and government revenue increased by ~47% pcp Benefits flowing despite Game Change Program not fully implemented Corporate & government revenue growth (FY10-FY11) FY10 +29% FY11 High yield* fares revenue growth (FY10-FY11) FY10 +13% FY11 Reduced revenue volatility with higher yield and improving revenue mix Note: * High yield fares include flexi and premium fares 15

16 Corporate accounts update Signed 39 new corporate accounts in FY11 with minimum contract value of over $60m (annualised) Corporate account wins (FY11) - New accounts include Accenture, Broadcast Australia, Google*, Parmalat, Reed Group, AFL and NBN Co - Contracted 4 additional ASX50 companies, now total of 19 ASX50 companies have a travel account with Virgin Australia Of 50 managed corporate accounts renewed this year, all were at the same or higher share than previous contract More new accounts signed post 30 June 2011 including Leighton and Spotless 18 Q1 to Q3 FY11 21 Q4 FY11 Growing momentum in corporate and government revenue share Note: * Account from the US 16

17 Progress to date: create global network Completed global network ahead of schedule - Implemented alliance with Etihad - Implemented alliance with Air New Zealand, in July Gained approval for alliance with Delta, implementation by end of Agreed codeshare with Hawaiian Airlines - Agreed alliance with Singapore Airlines (awaiting regulatory approval) - Agreed codeshare with Virgin Atlantic to Hong Kong Increased participation in outbound and inbound international traffic Global network to over 400* destinations Note: * Unique codeshare and interline destinations 17

18 Virgin Australia network: as at 30 June 2010 Virgin Australia Virgin Atlantic Virgin America Emirates Delta* Alaska* Bangkok Airways South African Airways To / from US London Chiang Mai Bangkok Utapao Phuket Lampang Koh Samui Krabi Indianapolis Columbus Cincinnati Baltimore Philadelphia To / from LON Calgary Vancouver Seattle Minneapolis Portland Toronto Ottawa Eugene Detroit Redding Medford Boston Chicago Santa Rosa Reno New York San Francisco Salt Lake City Washington Los Angeles Las Vegas Raleigh Memphis Atlanta Phoenix Orlando Dallas Tampa New Orleans Fort Lauderdale Mexico City Houston Miami Denpasar Port Moresby Honiara Port Vila Nadi Apia Johannesburg Cape Town Port Elizabeth Durban East London Cairns Nuku alofa Rarotonga Brisbane Perth Adelaide Melbourne Sydney Auckland Hamilton Note: * Does not include all destinations Queenstown Dunedin Wellington Christchurch 18

Virgin Australia network Virgin Australia Virgin Atlantic Virgin America Hawaiian Etihad Air NZ** Delta* Singapore / Silk^ To / from US To / from US Manchester Dublin Damascus Beirut Amman Jeddah

19 Virgin Australia network Virgin Australia Virgin Atlantic Virgin America Hawaiian Etihad Air NZ** Delta* Singapore / Silk^ To / from US To / from US Manchester Dublin Damascus Beirut Amman Jeddah London Erbil Paris Baghdad Kuwait Damman Bahrain Doha Riyadh Brussels Frankfurt Geneva Tehran Milan Abu Dhabi Munich Muscat Minsk Athens Peshawar Islamabad Lahore Delhi Karachi Ahmedabad Mumbai Hyderabad Bengaluru Coimbatore Kochi Thiruvananthapuram Male Chennai Casablanca Istanbul Moscow Larnaca Alexandria Cairo Abu Dhabi Johannesburg Kolkata Cape Town Khartoum Note: * Does not include all Delta destinations; ** Does not include all New Zealand domestic destinations ^ Awaiting regulatory approval Perth Adelaide Melbourne Brisbane Gold Coast Sydney Queenstown Dunedin Auckland Hamilton Rotorua Wellington Christchurch Indianapolis Detroit Columbus Philadelphia Cincinnati Baltimore To / from LON To / from AUH Seattle Minneapolis Toronto Ottawa Astana Boston Sacramento Chicago New York Almaty Beijing Tokyo San Francisco Salt Lake City Seoul Nagoya Washington Chongqing Los Angeles Las Vegas Osaka Memphis Raleigh Chengdu Shanghai Fukuoka San Diego Phoenix Atlanta Kathmandu Kunming Guangzhou Xiamen Orlando Dhaka Shenzen Taipei Cancun Lihue Kahului Tampa Yangon Dallas Chiang Mai Hanoi Hong Kong Honolulu Houston Guadalajara Fort Lauderdale Phuket Da Nang New Orleans Bangkok Siem Reap Ho Chi Minh City Miami Penang Manila Kona Puerto Vallarta Langkawi Cebu Phnom Penh Colombo Davao Brunei Kuala Lumpur Kuching Kota Kinabalu Singapore Manado Medan Balikpapan Honiara Port Pekanbaru Lombok Port Moresby Vila Denpasar Apia Palembang Jakarta Nadi Solo City Surabaya Nuku alofa Cairns Rarotonga 19

20 Growing international capacity share Virgin Australia network* Oneworld** International capacity market share^ (Jul 2004 Apr 2011) Forecast 40% JAL Malaysia 30% 20% Air NZ Singapore***; Virgin Atlantic; Hawaiian 10% Delta Etihad 0% Jul 04 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Virgin Australia global network capacity share in and out of Australia: ~26% by July 2012* Note: * Includes V Australia, Pacific Blue, Polynesian Blue, Etihad, Air New Zealand, Delta Airlines, Singapore Airlines, Virgin Atlantic, and Hawaiian Airlines; ** Includes Qantas, British Airways, Cathay Pacific, Japan Airlines, LAN Airlines, and Malaysia Airlines other Oneworld carriers do not have capacity in or out of Australia; *** Awaiting regulatory approval; ^ Market share based on seat capacity, and forecast based on latest April 2011 data Source: Bureau of Infrastructure, Transport and Regional Economics 20

21 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 codeshare in Western Australia - Introducing ATR fleet to increase regional network reach: destinations include Canberra, Port Macquarie and Gladstone Aligned our network to access growth markets with minimal capital expenditure 21

22 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 Prudent capacity management domestic capacity growth of ~5% in FY11, expected 4-6% in H1 FY12 Continued focus on cost and improved efficiency and productivity 22

23 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 and Brisbane (July 2011) Upgraded Brisbane terminal Introduced priority boarding Introduced priority screening Melbourne and Brisbane Product and service enhancements are ahead of schedule 23

24 Uniforms Virgin Blue 24

25 Uniforms Virgin Australia 25

26 Boeing 737 interior Virgin Blue 26

27 Boeing 737 interior Virgin Australia 27

28 Lounges Virgin Blue 28

29 Lounges Virgin Australia 29

30 Premium direct Lounge entry Sydney 30

31 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+ services*, 150+ lounges) - Multiple retail, credit card, and everyday partners (over 380 partners) - Improved Call Centre service Unique features that make a real difference - Easier to get the flight that you want - Fairer status earning - Benefits that reward the whole family Note: * Flight services on which Velocity members can earn and burn frequent flyer points with airline partners, including Singapore Airlines alliance currently awaiting regulatory approval 31

32 Status match limited time 32

33 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 staff engagement and talent development Virgin Australia was named Australia s most attractive employer* Virgin Australia staff underpin the success of Virgin Australia and the Game Change Program Note: * 2011 Randstad Awards 33

34 Game Change Program scorecard % completed Invest in our team Enhance in-flight and on-the-ground guest experience Develop comprehensive global virtual network* Ahead of schedule Integrate and align the airline operations and brands Ahead of schedule Maintain cost advantage and efficiencies Continuous Early benefits being realised Achieve a more balanced revenue mix, and improved yields and return FY11 FY12 FY13 Note: * Singapore Airlines alliance awaiting regulatory approval 34

35 Still to come Activity Turbo-prop fleet entry into service Full trans-continental J class launch Hawaiian Airlines codeshare Delta alliance implemented Mackay Lounge open Network-wide J class launch International operations re-branding Coolangatta Lounge open Singapore Airlines alliance implemented Virgin Atlantic codeshare to Hong Kong Timeline Prior to 31 October 2011 Prior to 31 October 2011 Prior to 31 December 2011 Prior to 31 December 2011 Prior to 31 December 2011 Prior to 31 January 2012 Prior to 31 January 2012 Early 2012 Early 2012 Early

36 Game Change Program a three year journey Reposition Lead & leverage Plan & implement Formulate Game Change strategic plan and commence implementation Conclude roll out of Game Change strategic plan and begin benefits realisation from 2H FY12 Build upon strategic positioning in the global airline market from strengthened position in domestic market FY11 FY12 FY13 36

37 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 government markets Confident we have the right strategy to manage our response to changes in future market conditions and to ensure a stable and successful future for Virgin Australia 37

38 38

Virgin Australia Holdings HY13 half year results 26 February 2013

Virgin Australia Holdings HY13 half year results 26 February 2013 Introduction Delivered solid result despite market dynamics and economic environment Economic uncertainty Strong competitive capacity growth