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Virgin blames uncertainty for coy guidance


Virgin Australia has blamed uncertain economic conditions and strong airline competition for its reluctance to give firm profit guidance for the year ahead.

Chief executive John Borghetti told shareholders in Brisbane the airline expects to improve its underlying profits during the 2012/13 financial year.

The upmarket carrier also stuck to its previous forecast domestic capacity growth of eight to nine per cent in the first half.

While Virgin's guidance for this financial year has not changed since August, Mr Borghetti said uncertain economic conditions and poor consumer sentiment were hampering its ability to provide profit guidance.

"The state of the economy in general, the competitive nature within the industry, it's too unclear to give an outlook any more specifically," he told reporters after Virgin's annual general meeting on Tuesday.

Earlier, Mr Borghetti told shareholders the company expected to deliver a more balanced mix between first and second half-year results than has been achieved historically.

Three weeks after announcing plans to buy a 60 per cent stake in budget carrier Tiger Airways for $35 million, Mr Borghetti was confident of challenging the dominance of Qantas subsidiary Jetstar.

"Definitely, we would be a very, very strong challenger ... just like we've challenged Qantas in the business market," he told journalists, adding Tiger was still a small operator.

Virgin has also made a $98.7 million bid for Skywest, as it aims for a slice of the mining fly-in, fly-out market.

Virgin made an underlying pre-tax profit of $82.5 million in the 2011/12 financial year.

Its net profit in the same period was $22.8 million, and the recent Tiger and Skywest deals are likely to hit net profit in the 2012/13 year.

Ahead of the meeting, some shareholders had expressed concern about Mr Borghetti's $4 million pay packet.

However while shareholder groups CGI Glass Lewis and the Australian Shareholders Association urged investors to vote against Virgin's remuneration report, just 3.6 per cent of proxy votes were opposed.

One disgruntled shareholder asked why Mr Borghetti signed the remuneration report instead of non-executive directors.

Chairman Neil Chatfield responded by saying: "I can assure you that the remuneration committee manages that quite appropriately."

Meanwhile, Virgin has announced an expansion of its codeshare agreement with Singapore Airlines, which will enable travellers from Brisbane, Sydney and Melbourne to fly to cities in Europe and the UK.

Mr Borghetti said the airline's transformation plans had progressed faster than expected, and the next phase of the program had begun.

Virgin Australia's shares shed 1.5 cents to close at 48 cents.