Revenue up, passengers up but profits down

VS lost £93m last year, more than the year before. Yet both revenue and passenger numbers were up.

No wonder they're cost cutting.

The new CEO's blaming the recession and the Olympics but says he expects a much better performance this year.

http://news.sky.com/story/1091846/virgi ... nnual-loss

The question one should ask is, are they cutting the right costs?

This was long trailed and due to the one off items is not as poor as originally reported. Compare this to IAG (BA's parent) losing €278m in Q1 alone and AF / KLM losing €630m also in Q1 2013. The downturn has had an impact on all airlines and while VS might have work to do on cost management, I believe it has a good future with all the recent announcements.

As to cuts, well, cut the UCDS and return to the UCS I say.

This was long trailed and due to the one off items is not as poor as originally reported. Compare this to IAG (BA's parent) losing €278m in Q1 alone and AF / KLM losing €630m also in Q1 2013. The downturn has had an impact on all airlines and while VS might have work to do on cost management, I believe it has a good future with all the recent announcements.

As to cuts, well, cut the UCDS and return to the UCS I say.

Interestingly with IAG, BA broke even, Iberia lost €202 and the rest were "restructuring costs".

I'd read between the lines. Premium traffic was 9.2% higher, revenue 5% up, and pax numbers only 3% up means they are either discounting like crazy in UC and PE (to maintain loads?) or they are counting pure traffic (including upgrades etc) not just revenue traffic (that would be an unusual accounting treatment). The CEO virtually admits this - how does he square 'a difficult summer what with the Olympics' with 9.2% more premium traffic?

Slinky, you can't compare this to IAG's figures - their figures contain some enormous write downs, VS's don't.

Our red friends have a real structural loss problem, and they need to address this and soon. Cost cutting is not enough by a long way - they need to build UC and PE yields. They should take UC off the Gatwick fleet altogether and enhance the product - put stuff back to how it was and build the yields again. They should stop the idiotic 'cash for upgrade' at check in. And they need to look long and hard at what UC is for - the place people aspire to for their special trip? Or the home of the regular business traveler? I'm convinced they think the former, and that's why so many people I know no longer use them for business travel.

This company needs to split into two - or work out which horse it is supposed to be riding and get rid of the other one. It is almost impossible to be the two things VS is trying to be - the premium leisure carrier (LGW/MAN/GLA) and the full service business carrier, nose to nose with BA (LHR). Something has to give, or the whole lot will be for the birds...

You can have a rise in premium traffic despite Olympic issues.

From a hotel point of view, the Olympics was somewhat of a poisoned chalice for London, as many - people stayed away - remember how quiet the city was last June and July?

That's traditionally London's busiest time of the year. So the Olympics provided a massive boost for August but diluted revenue for other months and I have no reason to believe airlines experienced anything differently.

I haven't witnessed anything like the discounting of PE and J cabins like there was post Lehman brothers, I think VS main problem is that the sleeping giant, BA, woke up last year. And how!

They should take UC off the Gatwick fleet altogether and enhance the product - put stuff back to how it was and build the yields again.

Curious as to why they should take UC off the Gatwick fleet. In the past 2 or 3 years, prices have dramatically risen to the point where they are comparable with Upper fares out of Heathrow. 2 to 3 years ago you would pay £1500 to £1800 for an upper fare - these now start around £2200 and on average are closer to £2500 for a Z.

The many flights I have taken out of Gatwick / Manchester have nearly always been full, and we dont need to discuss how difficult it is to spend miles on these routes in Upper.

Yes there are "some" seats available for miles but they are pretty scarce.

In fact, is it not true that 747's are replacing the 2 class A330's which will provide more upper seats for sale and are replacing 14 seat 747's with 3 class A330 on the Barbados route, again to provide more Upper availability.

David

Strategically, it is the wrong way to go, UC on predominantly leisure services.

I would bet the yields on a per seat mile basis on LGW and MAN in UC are WELL behind the same figures at LHR.

You can have a rise in premium traffic despite Olympic issues.

Indeed, Sealink - but the only conclusion you can draw is that their yields got hammered....