Virgin Australia Blames Carbon Tax for Financial Woes

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by | Aug 6, 2013

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Virgin Australia logoThe airliner Virgin Australia updated its financial guidance for the year ended June 30, 2013, indicating that the carbon tax, among other things, was having a negative impact on the company’s performance.

The company said the pre-tax costs of the carbon tax for the 2013 fiscal year were between $40 million and $45 million, and the costs were unable to be recovered due to a weak economic climate. Virgin shares dropped 4.4 percent on Monday after the company posted its new guidance on the Australian Securities Exchange, according to the Courier Mail.

In addition to the carbon tax, the company cited a difficult and competitive environment and restructuring costs as contributing to its expected loss of between $85 million and $98 million for the 2013 fiscal year. The company is implementing a new booking and ticketing system and acquired Skywest Airlines and a majority stake in Tiger Airways.

As for the carbon tax, the airline’s CEO John Borghetti told reporters that a weak local economy and strong competition had made it impossible to recover the cost of the tax in higher ticket prices, according to the Courier Mail. Virgin also announced an increase to fares and international surcharges to offset increasing fuel costs, which it said had risen 13 percent in the past two months.

Meanwhile, Australian Opposition Leader Tony Abbott promised that if he is elected on Sept. 7, one of his first priorities will be to scrap the carbon tax, according to the AAP. Speaking to a group of workers at a meatpacking plant, Abbott said the facility was “under direct threat from the carbon tax” instituted last year by the federal government, reported the APP. If the Labor party retains control, it plans to adjust the carbon tax from a fixed pricing scheme to a floating, market-based emissions trading scheme.

In other carbon-tax related news, UK-headquartered, coal-fired power producer Drax said the carbon tax contributed to its earnings falling 22 percent in the first half of 2013, according to the Yorkshire Post. Since the EU ended its free carbon allowances for utilities, Drax had to pay $107 million for EU carbon allowances, compared to the $58 million it had to pay last year for the permits.

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