Low cost carrier Virgin Blue has deferred some capital expenditure for the fiscal 2009 year due to challenging conditions in aviation markets and said it has no need to raise fresh capital.
Chief executive Brett Godfrey told shareholders at the airline's annual general meeting that non-core capital expenditure has been deferred.
Spending for the second half of the year will be cut to $US530 million ($806 million), from $US605 million.
Mr Godfrey said the group's balance sheet remains strong and that it has the potential to release $100 million or more in cash to its operations if needed, perhaps by offloading non-core assets.
So "no equity or capital raising'' was required.
Mr Godfrey said the airline's fiscal 2008 year was dominated by the high cost of fuel.
But this year, the industry faces weakening demand.
"Weakening demand noticed and will likely overtake fuel as the prime industry risk in 2009,'' he said.
Softer demand was likely to be somewhat offset by falling jet fuel prices, he added.
In the meantime, Virgin Blue has a "down-side contingency plan prepared.''
Virgin Blue chairman Neil Chatfield said there were tough times ahead.
"We expect the operating environment for the 2009 financial year to be the most difficult Virgin Blue has yet experienced,'' he said. "Despite a recent easing of global oil prices, which has brought some relief, the softening economic conditions are presenting a continuing challenge to our business.''
Mr Chatfield also said accounting rules requiring the airline to mark to market its hedge positions had resulted in a pre-tax accounting charge of $200 million, but this would not impact its cash position.
"Ironically, shareholders should also note that the company has, based on current exchange rates, an unrealised foreign currency gain, also approximating $200 million which and required by (accounting standards) has not been recorded through the profit and loss account.''
"Notwithstanding this accounting treatment, which has also impacted several major airlines, our overall risk management policy continues to serve us well in terms of delivering a conservative economic outcome and protecting our underlying cash position, which remains strong.''
At October 31, the airline's cash balance was $602 million, steady from the end of June.
Mr Chatfield said Virgin Blue was looking forward to the launch of its international long haul airline V Australia in early 2009.
"Despite launching in less than optimal circumstances, the fact remains that the Australia to US market has limited competition and we remain convinced of the potential of V Australia in the medium to long term,'' he said.
AAP
