That figure has now been slashed to somewhere between $20 million and $40 million, and the airline must now be operating at a loss. Profit of $62.5 million was recorded in the December half.
The revised range represents a huge shift in less than four weeks, indicating either that previous guidance was too high, or that discretionary spending by consumers has ground to a halt.
Either way, institutional investors are feeling blindsided by the announcement and will be seeking a fuller explanation in meetings with Virgin Blue management this week.
Seen in the context of a business that generates sales approaching $250 million each month, and with short-term variation in sales flowing to the bottom line, it seems that revenue expectations for this month and next have fallen about 10 per cent since the last guidance.
This represents a big decline in near-dated travel bookings. The bulk of Virgin's business is transporting price-conscious consumers on their holidays. These leisure flights are not generally booked the day before and management would have had a good picture of forward bookings to the end of next month when previous guidance was issued earlier this month. If the Virgin downgrade is taken at face value, the next round of updates from discretionary retailers will not be pretty.
