Budget airline Virgin Blue Holdings Ltd
(ASX:VBA) had downgraded its earnings expectations for the 2010 financial year and says it expects average fares to fall 10%.
The company says it now expects to report net profit before tax and exceptional items of between $20 and $40 million, compared to previous guidance of $80 million.
The airline says since giving this previous guidance earlier in the month, it has continued to see rapid deterioration and increased volatility in the environment in which it operates in, particularly in travel for leisure both domestically and internationally.
Virgin Blue says this is consistent with the weakening trend seen recently in the broader retail market as well as an unexpected and sudden decline in consumer confidence in the last month.
The decline in demand, Virgin says, has coincided with a period of increased industry capacity.
However, the company says despite the sharp downturn, the short haul business is still expected to make a net profit after tax and exceptional items in the order of $100 million.
Virgin Blue says it will continue to monitor market conditions and, should these prevail, it has the flexibility to adjust capacity through lease returns.
Virgin Blue reported a loss of $160 million for the year to June 30, 2009.
