Virgin customer loyalty program, initiatives help deliver solid first-half results

Airline posts strongest net profit result since 2010, and says it's on track to reach 7 million Velocity frequent flyer members by 2017

Virgin Australia has highlighted strong customer loyalty program growth, along with the success of several new customer-led initiatives, as contributors to its strong first-half financial results.

The airline posted half-year revenues to 31 December 2015 of $2.7 billion, an increase of 11.8 per cent year-on-year, with a group underlying EBIT of $161.4m, also a significant improvement. Underlying pre-tax profit was also up by $71.3m to $81.5m, while net profit was $62.5m, the group’s highest result since 2010.

Virgin’s Group CEO, John Borghetti, attributed the solid results to efforts to strengthen the fundamentals of each line of business, including domestic and international travel as well as its Tigerair subsidiary. The group reported very strong revenue per available seat kilometre (RASK) growth during the first half across all three types of air travel.

Borghetti also noted the success ongoing customer experience-led initiatives.

“The group is seeing very positive results from ongoing work in delivering an outstanding customer experience,” he said. “Customers voiced their strong support for new initiatives launched during the half and the Virgin Australia Group maintained its lead in domestic, on time performance over its major competitor for 15 consecutive months.”

Recent initiatives included opening a new Perth terminal and lounge, which led to a 7.6 per cent improvement in customer satisfaction scores, and upgrades to the Brisbane lounge. Virgin said the launch of ‘the business’ on A330s was also well received, with customer surveys showing 83 per cent preferred these to Qantas’ comparable offering.

Virgin Australia’s Velocity customer loyalty program proved another strong performer during the first half, delivering revenue of $154.8 million, a 26.3 per cent improvement year-on-year. Underlying EBIT also rose to $70.8 million, a 56.6 per cent increase on first-half 2015.

Membership also grew by 2600 members a day to 5.7 million, a rise of 21.7 per cent year-on-year.

“Velocity’s existing initiatives and partnerships are resonating with Velocity members and the business is continuously finding more innovative ways for members to earn Velocity Frequent Flyer points,” Borghetti said.

“Velocity is set to meet its earnings growth targets of at least 15 per cent growth in Underlying EBIT by the end of the 2016 and 2017 financial years and have more than 7 million members by the end of the 2017 financial year.”

Adding to the Velocity business in the first half was Virgin’s acquisition of data analytics consultancy, Torque Solutions, which was purchased for $4.8 million. According to the airline’s financial statement, the business has contributed revenue of $1.4 million and a net loss of $200,000 in the first half of the year.

Virgin sold a 35 per cent in its Velocity frequent flyer program to Affinity Equity Partners in late 2014, raising a reported $336m from the deal.

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+: google.com/+CmoAu

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