Virgin Australia Airlines Financial Strategy Essay

Introduction

Virgin Australia airlines operate in a very competitive environment. Moreover, the economic conditions of the year 2013 were somewhat difficult. However, despite the difficult economic conditions, Virgin Australia was able to attain revenues amounting to $4,020.4 million for FY2013. The “Game Change Program Strategy” that took effect in the year 2011 is believed to have contributed to the revenue growth.

Throughout the year 2013, Virginia Australia Airlines employed strategies that facilitated its growth and expansion (Hume, 2013). This paper will give a clear outlay of the airline’s finances, the future financial plans, and the manner in which the airline spent its revenues.

Total financial outlay value

In 2012, Virgin Australia airlines’ revenue was $3,919 million. The airline experienced revenue growth of 2.6% in 2013 and its revenues increased to $4,020.4 million. The “Game Change Program Strategy” enabled the airline to increase its sale of international tickets, thus increasing the airlines’ activities. With the increase in activities, the operating expenses increased from $3,852 million in 2012 to $4,124 million in 2013.

It is noteworthy that in the first and second quarters of 2013, the airline experienced a considerable reduction in the number of international flights following the toughened economic conditions. However, the airline experienced some growth in the sale of international tickets in the last quarter of FY2013. Interestingly, fuel costs remained at the same levels despite the increased number of activities because of the strong control of costs by all the airlines. Since fuel is the core expenditure in the airline industry, the control of fuel costs benefited Virgin Australia Airlines greatly given that the airline increased its fuel consumption in the year 2013.

Expenditure analysis

With the increase in the number of operations of the airlines, the overall expenditures increased by 7.1 %. Essentially, in 2012 and earlier years, the airline would spend about $3,852 million for all operations, but it spent $ 4,124 million in 2013. The airline made articulate financial plans for 2014, and its operating expenditures are likely to increase simultaneously with the increase in revenues. The Game Change Program Strategy corresponded to the following expenditures.

1. Increase in the volume of oil consumption because of the increase in the number of flights, especially in the last quarter of the FY2013.
2. There was an additional route expansion expense following the increased number of tickets sold in the last quarter of the year.
3. Additional expenses on the labor expenditure following the expansion of activities. In fact, the airline expanded the workforce due to the increased activities and incurred an additional cost of $134.7 million on human labor expenses.
4. Expenses on the additional range of products and services to meet the need of the additional travelers, and upgrade their travel experience emerged (Teaupa, 2012).
5. Expenses to adapt the Sabresonic booking and check-in system emerged. The adoption of the mentioned check-in system streamlined the services at the airline; it speeded the operation of activities and offered a variety of options for booking flights (Flynn, 2012).
6. Expenses on the catering activities increased following the increase in the number of customers. Essentially, the airlines’ catering expenses increased by $55 million following the caterers’ efforts to offer eloquent flight catering services.

Clearly, the increase in expenses in the year 2013 was at par with the increase in revenues generated. To increase further the revenues in the years to come, the airline made informed financial plans for the year 2014 and subsequent years.

Financial plans

The Virginia Australia airlines’ driving force is being the best airline that provides eloquent services at reduced costs in Australia (“Fairfax Media Publications,” 2013). To make the dream come true, the financial planners have distinct financial plans as described below.

1. The airline plans to invent ways through which costs and revenues growths are at par (De Roos, Mills, & Whelan, 2010). The airline aims at making profits of at least $400 million by FY2015.
2. The Virginia Australia airlines aim at creating a broad-based loyalty program. The program will aim at enhancing the frequent flyer program, and thus, the airlines aim at having about 5 million members in the program by FY2015.
3. The airline aims at upgrading its access to international markets. This approach will enable it to enhance its revenue growth, such that, by the end of FY2015, the airline will have additional revenue of about $150 million.
4. The airline aims at upgrading the in-flight and ground innovations to enhance the flight experience of all the customers. Within the year 2014 and part of 2015, the airline aims at investing in new products and services that enhance their flight services (“Aspire Aviation,” 2013).
5. The financial managers have the aim of making a continuous review of the airlines’ capital structure to ensure it is in line with the proposed growth strategies.

Conclusion

From the discussions, it is evident that Virginia Australian airlines have excellent financial plans. With the help of the previous strategies, the airlines are likely to experience massive revenue growth in the near future. The airlines should find ways of signing deals to insure them from the unanticipated economic environment and the high fuel prices. Indeed, if Virginia Australian airlines adhere to the set financial plans, it will reap massive profits and surpass its competitors in the competitive airline industry.

References

Aspire Aviation. (2013). The best is yet to come for Virginia Australia. Aspire Aviation, 6(2), 45-56.

De Roos, N., Mills, G., & Whelan, S. (2010). Pricing Dynamics in the Australian Airline Market. Economic Record, 86(275), 545-562.

Fairfax Media Publications. (2013). Virgin pays the price for turnaround plan. Financial Review. 8(42), 45-46.

Flynn, D. (2012). Virgin Australia’s John Borghetti on the business class price wars. Australian Business Traveler. 3(2), 11-15.

Hume, N. (2013). Virgin Australia shares hit by profit warning. Financial Times. 12(2), 50-52.

Teaupa, A. (2012). John Borghetti: Taking customer service to new heights. Customer Service Excellence, 57(3), 10-12.