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ANNUAL For personal use only REPORT 2016 HELSINKI ANCHORAGE STOCKHOLM GOTHENBURG EDINBURGH MOSCOW COPENHAGEN MINSK MANCHESTER DUBLIN AMSTERDAM BERLIN WARSAW EDMONTON LONDON DUSSELDORF SASKATOON BRUSSELS FRANKFURT CALGARY REGINA PARIS PRAGUE ASTANA VANCOUVER WINNIPEG KELOWNA MUNICH VIENNA ZURICH VICTORIA VENICE LJUBLJANA GENEVA BELGRADE SEATTLE OTTAWA MILAN ZAGREB BUCHAREST MINNEAPOLIS MONTREAL BANJA LUKA PORTLAND TURIN BOLOGNA SPLIT ALMATY TORONTO HALIFAX DUBROVNIK SARAJEVO PODGORICA SOFIA DETROIT BOSTON BARCELONA ROME NEWARK BARI TIVAT ISTANBUL CHICAGO NEW YORK MADRID LAMEZIA TERME SACRAMENTO RENO SALT LAKE CITY COLUMBUS BRINDISI THESSALONIKI PHILADELPHIA PALERMO SKOPJE INDIANAPOLIS BALTIMORE BEIJING SEOUL DENVER CATANIA TIRANA ATHENS SAN FRANCISCO CINCINNATI WASHINGTON DC TEHRAN TOKYO (NARITA) KANSAS CITY LARNACA ERBIL NAGOYA OAKLAND LAS VEGAS NASHVILLE RABAT MALTA CHENGDU TOKYO (HANEDA) SAN JOSE RALEIGH/DURHAM ISLAMABAD FUKUOKA MEMPHIS BEIRUT OSAKA LOS ANGELES PHOENIX ATLANTA CASABLANCA CHONGQING DALLAS BAGHDAD LAHORE SAN DIEGO AMMAN WUHAN AUSTIN CAIRO KUWAIT SHANGHAI HERMOSILLO HOUSTON ORLANDO KATHMANDU NEW DAMMAM CHIHUAHUA ORLEANS TAMPA DUBAI CHANGSHA FT LAUDERDALE MEDINA BAHRAIN DELHI KUNMING LORETO XIAMEN MONTERREY RIYADH ABU DHABI MIAMI DOHA KARACHI DHAKA SHENZHEN LA PAZ CULIACAN MUSCAT HONOLULU JEDDAH AL AIN KOLKATA GUANGZHOU KAUAI SAN JOSE DEL CABO CANCUN MANDALAY HONG KONG GUADALAJARA AHMEDABAD MAUI PUERTO VALLARTA CHIANG MAI HANOI COZUMEL MUMBAI KONA VISAKHAPATNAM MEXICO CITY KHARTOUM HYDERABAD BANGKOK DA NANG HUATULCO BANGALORE YANGON SIEM REAP COIMBATORE CHENNAI KOCHI PHNOM PENH KOH SAMUI HO CHI MINH CITY THIRUVANANTHAPURAM PHUKET LANGKAWI KOTA KINABALU PENANG MALÉ COLOMBO LAGOS MEDAN BANDAR SERI BEGAWAN KUALA LUMPUR KUCHING MANADO ENTEBBE SINGAPORE PEKANBARU NAIROBI BALIKPAPAN PALEMBANG MAHE SEMARANG MAKASSAR JAKARTA SURABAYA PORT MORESBY (PAPUA NEW GUINEA) DAR ES SALAAM BANDUNG LOMBOK YOGYAKARTA DENPASAR (BALI) HONIARA (SOLOMON ISLANDS) COCOS (KEELING) ISLANDS CHRISTMAS ISLAND DARWIN APIA (SAMOA) PORT VILA (VANUATU) CAIRNS NADI (FIJI) PORT HEDLAND RAROTONGA (COOK ISLANDS) NUKU’ALOFA (TONGA) SUNSHINE COAST JOHANNESBURG BRISBANE DURBAN GOLD COAST EAST LONDON PERTH SYDNEY CAPE TOWN PORT ELIZABETH ADELAIDE CANBERRA AUCKLAND MELBOURNE WELLINGTON CHRISTCHURCH QUEENSTOWN DUNEDIN NETWORK KEY VIRGIN AUSTRALIA AIR BERLIN AIR NEW ZEALAND HAWAIIAN AIRLINES For personal use only DELTA AIR LINES VIRGIN AMERICA ETIHAD AIRWAYS AEROMEXICO SINGAPORE AIRLINES/SILKAIR ALASKA AIRLINES SOUTH AFRICAN AIRWAYS WESTJET AIRLINES HELSINKI ANCHORAGE STOCKHOLM GOTHENBURG EDINBURGH MOSCOW COPENHAGEN MINSK MANCHESTER DUBLIN AMSTERDAM BERLIN WARSAW EDMONTON LONDON DUSSELDORF SASKATOON BRUSSELS FRANKFURT CALGARY REGINA PARIS PRAGUE ASTANA VANCOUVER WINNIPEG KELOWNA MUNICH VIENNA ZURICH VICTORIA VENICE LJUBLJANA GENEVA BELGRADE SEATTLE OTTAWA MILAN ZAGREB BUCHAREST MINNEAPOLIS MONTREAL BANJA LUKA PORTLAND TURIN BOLOGNA SPLIT ALMATY TORONTO HALIFAX DUBROVNIK SARAJEVO PODGORICA SOFIA DETROIT BOSTON BARCELONA ROME NEWARK BARI TIVAT ISTANBUL CHICAGO NEW YORK MADRID LAMEZIA TERME SACRAMENTO RENO SALT LAKE CITY COLUMBUS BRINDISI THESSALONIKI PHILADELPHIA PALERMO SKOPJE INDIANAPOLIS BALTIMORE BEIJING SEOUL DENVER CATANIA TIRANA ATHENS SAN FRANCISCO CINCINNATI WASHINGTON DC TEHRAN TOKYO (NARITA) KANSAS CITY LARNACA ERBIL NAGOYA OAKLAND LAS VEGAS NASHVILLE RABAT MALTA CHENGDU TOKYO (HANEDA) SAN JOSE RALEIGH/DURHAM ISLAMABAD FUKUOKA MEMPHIS BEIRUT OSAKA LOS ANGELES PHOENIX ATLANTA CASABLANCA CHONGQING DALLAS BAGHDAD LAHORE SAN DIEGO AMMAN WUHAN AUSTIN CAIRO KUWAIT SHANGHAI HERMOSILLO HOUSTON ORLANDO KATHMANDU NEW DAMMAM CHIHUAHUA ORLEANS TAMPA DUBAI CHANGSHA FT LAUDERDALE MEDINA BAHRAIN DELHI KUNMING LORETO XIAMEN MONTERREY RIYADH ABU DHABI MIAMI DOHA KARACHI DHAKA SHENZHEN LA PAZ CULIACAN MUSCAT HONOLULU JEDDAH AL AIN KOLKATA GUANGZHOU KAUAI SAN JOSE DEL CABO CANCUN MANDALAY HONG KONG GUADALAJARA AHMEDABAD MAUI PUERTO VALLARTA CHIANG MAI HANOI COZUMEL MUMBAI KONA VISAKHAPATNAM MEXICO CITY KHARTOUM HYDERABAD BANGKOK DA NANG HUATULCO BANGALORE YANGON SIEM REAP COIMBATORE CHENNAI KOCHI PHNOM PENH KOH SAMUI HO CHI MINH CITY THIRUVANANTHAPURAM PHUKET LANGKAWI KOTA KINABALU PENANG MALÉ COLOMBO LAGOS MEDAN BANDAR SERI BEGAWAN KUALA LUMPUR KUCHING MANADO ENTEBBE SINGAPORE PEKANBARU NAIROBI BALIKPAPAN PALEMBANG MAHE SEMARANG MAKASSAR JAKARTA SURABAYA PORT MORESBY (PAPUA NEW GUINEA) DAR ES SALAAM BANDUNG LOMBOK YOGYAKARTA DENPASAR (BALI) HONIARA (SOLOMON ISLANDS) COCOS (KEELING) ISLANDS CHRISTMAS ISLAND DARWIN APIA (SAMOA) PORT VILA (VANUATU) CAIRNS NADI (FIJI) PORT HEDLAND RAROTONGA (COOK ISLANDS) NUKU’ALOFA (TONGA) SUNSHINE COAST JOHANNESBURG BRISBANE DURBAN GOLD COAST EAST LONDON PERTH SYDNEY CAPE TOWN PORT ELIZABETH ADELAIDE CANBERRA AUCKLAND MELBOURNE WELLINGTON CHRISTCHURCH QUEENSTOWN DUNEDIN CONTENTS 02 Snapshot 18 Virgin Australia Domestic For personal use only 04 The Chairman’s Report 22 Virgin Australia International 06 The CEO’s Report 26 Alliances 08 Supporting Australia’s Future 28 Charter & Cargo 10 Sustainability & The Environment 30 Velocity Frequent Flyer 12 Embracing Australian Talent 32 Tigerair Australia 14 Our People 34 Fleet 16 Safety 36 Board of Directors ANNUAL REPORT 2016 1 SNAPSHOT PASSENGERS CARRIED (MILLIONS)1 18.6 19.4 19.3 20.0 22.3 23.7 2011 2012 2013 2014 2015 2016 TOTAL REVENUE & INCOME ($MILLIONS) 3,271 3,920 4,020 4,307 4,749 5,021 For personal use only 2011 2012 2013 2014 2015 2016 2 VIRGIN AUSTRALIA GROUP SEGMENT EBIT2 ($MILLIONS) 210.6 151.0 65.9 6.0 0 -14.0 -126.0 2011 2012 2013 2014 2015 2016 2016 2015 FINANCIAL HIGHLIGHTS ($million) ($million) Underlying profit/(loss) before tax 41.0 (49.1) Statutory net profit/(loss) after tax (224.7) (93.8) OPERATING STATISTICS (Group)1 2016 2015 Passenger carried (m) 23.7 22.3 Available Seat Kilometres (m) 47,038 45,969 For personal use only Revenue Passenger Kilometres (m) 37,326 35,774 Revenue Load Factor 79.4% 77.8% 1. The operating statistics include 100% of Tigerair Australia from 1 November 2014. 2. Segment EBIT is a non-statutory measure and is used by management and the Board to assess the financial performance of individual segments within the Group. Refer to note B1 to the consolidated financial statements in the 2016 Virgin Australia Group Annual Financial Report for further information. ANNUAL REPORT 2016 3 For personal use only 4 VIRGIN AUSTRALIA GROUP THE CHAIRMAN’S REPORT The 2016 financial year was I would like to thank my fellow board We also continued to members, as well as our strategic develop our workforce and one of significant change partners and new major shareholders, contribute to the communities for the Virgin Australia whose support has been integral to our we serve. The Group undertook Group as we finalised progress. We are fortunate to have such a number of initiatives to build a strong and diverse mix of strategic the skills and harness the talents the major transformation shareholders. of its workforce, including an emerging leaders program for cabin of the business and, In relation to the financial results for crew team members and a Female with the support of our the 2016 financial year, whilst the Group Leadership Development Group to delivered improvements in earnings shareholders, took steps build resilience and organisational across all business segments to report presence in our operational teams. to renew the company’s an Underlying Profit Before Tax3 of $41.0 Indigenous Employment Skills million, further work is necessary. This capital structure and workshops were also held in regional work has the strong focus of the Board strengthen its overall locations to assist in the development of and management team and includes sustainable employment opportunities financial position. the execution of the Better Business for Indigenous Australians. program and the pursuit of sustainable During the year, the Board of Directors revenue growth. I would like to thank all of our team initiated a review of the capital structure members for their work this year. I In addition to our concerted efforts in order to strengthen the balance sheet look forward to reporting the Virgin to improve our financial base, we also and enhance cash flow generation and Australia Group’s future outcomes to maintained our focus on providing an profitability. The outcomes of the review you, and I thank all of our shareholders outstanding experience to Australian included the launch of an entitlement for their continued support of the Virgin travellers. Virgin Australia’s excellence offer and the introduction of the Better Australia Group. in customer service was recognised with Business program. The entitlement numerous industry awards including: offer to raise $852 million in equity was launched in June 2016 and was • Best Cabin Crew and Best Frequent supported by our major shareholders. Flyer Scheme in the 2016 Australian In addition, we commenced a program Business Traveller Awards; of capital and operational efficiency • Best New World Carrier and Best initiatives to build efficiency in the Elizabeth Bryan Cabin Crew in the AirlineRatings.com business and deliver significant cash Chairman 2016 Airline Excellence Awards; and flow savings in the future. • In July 2016, the Group was honoured The 2016 financial year also saw to receive the Best Domestic Airline significant changes to our shareholder award in the Australian Federation of base. HNA Aviation Group (HNA), Travel Agents’ 2016 National Travel a division of HNA Group, a Fortune Industry Awards. Global 500 multinational