Virgin Australia, which Abu Dhabi’s Etihad Airways owns a 10.5 percent stake, has forecast it will make a loss of up to AUD$110m (US$98m) for the full year 2013, it was reported.
The airline blamed the difficult economy, competition, restructuring costs and the carbon tax for the loss.
“Aviation’s a tough game,” Virgin Australia Chief Executive John Borghetti told Bloomberg. “Leisure, in particular, needed a lot of stimulating to get people to put their hands in their pocket,” he added, putting the blame on the weak economic climate.
The extra costs include moving to the Sabre ticketing system, which Bloomberg said will total AUD$100m, including AUD$36m already announced at its first-half results in February.
However, the system has already proved problematic as on Tuesday the carrier was forced to do manual check-ins for all domestic and international flights as a result of problems affecting the global Sabre system, which is used by airlines around the world.
A Virgin spokeswoman said the airline had cancelled 35 flights on its domestic and international network as a result of the problems.
The carrier has also been hit by a carbon tax, which will add up to US$50m to its balance sheet and the carrier said it was unable to transfer the extra cost to the customer as prices were already low and it would be anti competitive to do so.
"For anybody to suggest that this is recoverable in the current economic climate is just not a realist," Borghetti said.
Last month, Abu Dhabi’s Etihad Airways confirmed it has begun buying shares in Virgin Australia in a bid to increase its ownership beyond the current 10.5 percent stake.
In July a large parcel of shares in Virgin Australia was bought for AUD$7m ($6.5m). In an interview with The Australian newspaper, Etihad CEO James Hogan said the carrier was "buying on the market at the moment".
“We applied for and received Foreign Investment Review Board approval to increase our previous stake of 10 percent in Virgin Australia to 19.9 percent. We may purchase shares to increase our shareholding where it is prudent to do so, and will provide notice in accordance with regulatory disclosure requirements," Etihad said in a statement.
Hogan said the Abu Dhabi carrier was “in this for the long-term game... It is not a race.”
Fellow investor in Virgin Australia, Air New Zealand, recently increased its stake to 23 percent, making it the largest stakeholder in the airline. Singapore Airlines currently equals Etihad in its ownership of 19.9 percent.
The combination of the three airlines has helped Virgin Australia in its ongoing rivalry with Qantas, which this year signed a partnership with Dubai’s Emirates Airline.
“Having us and Singapore gives the group strength against Qantas,” Hogan said.
Etihad has bought stakes in a number of international carriers, including Germany’s AirBerlin, Ireland’s Aer Lingus, Air Seychelles, Air Serbia and India’s Jet Airways.
The Abu Dhabi carrier this year posted its strongest second quarter and half-year financial performances on record, boosted by its global network of partners.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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