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Virgin Australia set for big annual loss

Business

Virgin Australia is set for a big full-year loss after announcing its restructure will cost as much as $450 million.

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Australia’s second-biggest airline has reaffirmed its guidance for pre-tax underlying profit of $30 million to $60 million, but its bottom line will be hit by costs and writedowns of between $410 million and $450 million.

That includes $100 million of fourth-quarter restructuring costs, and $155 million to $175 million of non-cash impairments associated with a three-year cost-cutting program announced by the carrier last month.

The remainder of the costs and writedowns confirmed today include the $59.4 million already announced in the group’s interim results, plus an additional $100 million to $115 million related to an overhaul of its fleet.

Stripping out the charges, Virgin reaffirmed its guidance for annual underlying profit before tax of between $30 million to $60 million.

Virgin recorded a first-half net profit of $45.7 million for the six months to December 31, which came after a full-year loss of $93.8 million in 2014-15.

Virgin announced the restructuring costs as it launched a $852 million capital raising, the proceeds of which will be used to pay down debt and improve operations.

The 21 cents per share entitlement offer comes on top of a $159 million share placement, giving Virgin Australia a total $1.01 billion in new equity.

At 11.15am AEST, Virgin shares were up 0.50 cents, or 2.5 per cent, at 20.5 cents in a lower Australian share market.

-AAP

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