Branson’s losing altitude

Virgin Blue shares slumped another 7% this morning after the company told investors that it is heading towards a loss of $80 million in 2010-11.

It’s another case of everything that could go wrong has gone wrong for Australia’s number two airline.

The high Australian dollar has weighed heavily on tourist numbers from overseas, while rising interest rates have severely dented the confidence of domestic tourists.

More recently, the horror run of natural disasters here and abroad have put pressure on passenger numbers, while recent increases in fuel prices have rubbed salt into the wound.

“We have witnessed an unprecedented number of significant events in an extraordinarily short period of time, including natural disasters and a sharp spike in fuel prices,” Virgin Blue chief executive officer John Borghetti said this morning.

Borghetti, who joined Virgin in March 2010 after a long stint with Qantas, has been trying to turn things around with a focus on business travel, but he just can’t seem to get the clear air he needs to give the company some momentum.

Exactly how this turmoil is affecting Virgin Blue’s largest shareholder, billionaire Richard Branson, isn’t clear.

Certainly he hasn’t shown any sign so far of wanting to reduce his stake in the business, which currently sits at just under 26%.

But Branson must be growing frustrated. It’s less than two years since he showed his support for the company by buying about $80 million worth of shares in a Virgin Blue capital raising.

While Branson picked those shares for up to 20c, compared with the current price of 30c, the value of his stake has fallen to $171 million.

Back in May 2007, when the shares were at $2.70, Branson’s stake was worth more than $720 million.

Branson is highly unlikely to sell any time soon – he would appreciate that conditions are unlikely to get much worse than they are right now and will be hoping (along with Borghetti) that the share prices can only start to rise when things start to improve.

But longer term, you would have to wonder whether Branson is growing worried about the outlook for the airline industry, which seems to lurch from problem to problem.

Branson has always seen the airline sector as one ripe for his take-on-the-big-boys style. But the long list of external forces buffeting Virgin right now shows just how hard it can be to execute strategies of any kind.