Branson set to pump extra £40m into Australian budget airline Virgin Blue

Sir Richard Branson's Virgin Group is set to inject A$80m (£40m) into the Australian budget airline Virgin Blue after the carrier warned of looming full-year losses.

Virgin Blue Holdings is carrying out a deeply discounted A$231m rights issue and cancelling its dividend in an effort to shore up a balance sheet battered by an operating environment that the company has called the most challenging in its 10-year history. Virgin Blue is predicting losses of between A$160m and A$165m for the 12 months to the end of June.

Its short-haul operations are profitable and have increased their market share to more than 30 per cent but Virgin Blue's long-haul division, V Australia, has been hit particularly hard by the recession and is forecast to drop to between A$30m and A$35m in the red this year, with another A$60m to A$65m lost on start-up and foreign exchange costs.

Virgin Group, which owns 25.5 per cent of Virgin Blue, has committed to buy 305 million shares itself and is also acting as sub-underwriter for 20 per cent of the retail component of the offer, which could raise its stake to 30.2 per cent.

Sir Richard said yesterday: "Our belief in the future of the business is underlined by our ongoing support and sub-underwriting of the rights offer. Whilst the aviation world faces some tough market conditions, we have faith that Virgin Blue is well placed to meet the challenge with its strong brand and market position."

Virgin Blue reckons the worst is over and is predicting it will break even in 2010. "This is an opportunity to invest in one of the industry's most well-respected airline brands," said Brett Godfrey, the chief executive.

"The proceeds of the raising will significantly strengthen Virgin Blue's capital position and improve liquidity and financial flexibility which we believe is prudent in the light of challenging conditions facing the airline industry."

The money will not be used to offset losses from the last fiscal year, but will help manage the major fleet costs due to come in from 2011 as a string of aircraft leases come up for renewal. Twelve leases will end in 2011 and another 12 the following year.

Mr Godfrey, who has been in the post since the company was founded by Virgin Group in 2000, also announced yesterday that he would be stepping down next year.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor