Virgin Australia remains confident in its target of at least $150 million of annual revenue from cargo by mid-2017, despite sales having gone backwards in the first half of the financial year as the business was restructured, chief executive John Borghetti says.
Virgin launched its cargo division on   July 1, 2015, after its long-time freight manager Toll Holdings said Qantas would carry its freight, which had gone in the belly of Virgin aircraft since 2007. At the time, Qantas also re-signed with Australia Post for a five-year deal that, when combined with Toll, was expected to contribute more than $100 million of annual revenue. 
"We always knew we were going to take a hit in revenue in the short term," Mr Borghetti told The Australian Financial Review of the decision to manage the cargo itself rather than through Toll. "We were confident in the long term we'd be further ahead. I am still confident of our ability to do $150 million [by the end of the 2017 financial year]."
Virgin set a target in   August 2014 of tripling annual freight revenue to $150 million to $200 million by the end of the 2017 financial year.
Virgin did not break out freight revenue in its half-year results, but Mr Borghetti said it had picked up about 80 to 90 freight accounts since launching the business. The airline has signed up third-party providers like Menzies Aviation, dnata and Aerocare to provide ground-handling services that were once performed by Toll.
Last week, Virgin signed a heads of agreement with TNT to finalise a five-year deal to take effect from   July. Mr Borghetti said if the deal was finalised, it would be exclusive and would take business that was with Qantas now.
TNT is one of the three biggest air freight contracts in Australia, with the other two being Australia Post and Toll.

Dedicated freighter aircraft
Qantas has a far larger cargo division than Virgin, including dedicated freighter aircraft. There was speculation in 2015 that Virgin would have leased or bought freighters if it had won the Australia Post contract but it was renewed with Qantas.
Mr Borghetti said Virgin wouldn't rule out adding freighters in the future if it won the right contracts. "If we had confidence in the business we would," he said. "We do have confidence in the business, so we will."
Virgin's balance sheet and cash position are not as strong as rival Qantas. Morgans analyst Mark Williams said the $253 million negative free cash flow reported in the first half was "concerning", giving the favourable operating environment.
Qantas Freight reported a record $114 million of underlying earnings before interest and tax in 2015 from $1.067 billion of revenue. However, Qantas warned earnings in 2016 were not expected to match 2015's figure, amid aggressive competition in a flat domestic market.
On a global basis, the freight market is far weaker than the passenger market. International Air Transport Association (IATA) figures showed cargo volume expanded by 2.2 per cent in 2015, compared with 5 per cent growth in 2014.
IATA chief executive Tony Tyler said 2015 had been another "very difficult" year for air cargo.
"Growth has slowed and revenue is falling," he said in   February. "In 2011 air cargo revenue peaked at $US67 billion. In 2016 we are not expecting revenue to exceed $US51 billion."
IATA said in the Asia-Pacific region cargo demand had been weak, as a result of a shift in the Chinese economy to favour domestic consumption rather than exports.