Virgin Australia has reported profits of $129.1 million for the 2023 financial year, its first profit in 11 years as demand for travel soared and passengers returned to the skies, driving up airfares.
The figure represents a significant turnaround from the $565.5 million loss Virgin made in the previous financial year, with revenue improving 124 per cent to $5 billion as the number of passengers nearly doubled to 18.9 million, according to documents filed to the corporate regulator on Tuesday morning.
Virgin chief executive Jayne Hrdlicka said it was an important milestone for the business.
“It has been 11 years since Virgin Australia returned a profit, and our results signal that the transformation of Virgin Australia is progressing well,” she said.
“Value and choice are core to our business and as the continuing rise in cost of living impacts household budgets, we believe we are well positioned to continue to provide customers with the best value in the market.”
The recovery in revenue was predominantly driven by “record” demand from leisure travellers as well as business travellers of small-medium businesses, while corporate travellers returned at a slower rate. The airline has been eager to position itself as a ‘value’ carrier, sitting in between the premium and the budget ends of the market.
As the end of border closures ushered in an era of revenge travel, Virgin used every available aircraft in its fleet, which saw domestic capacity return to pre-COVID levels at the beginning of this year. Virgin also won more loyal customers last financial year, with its loyalty business Velocity notching a 68 per cent increase in revenue to $330 million, while with the number of Virgin frequent flyers lifted by 6.5 per cent to 11.5 million members.
The country’s second-largest domestic carrier slid into administration just two months into the COVID pandemic, during which it was unable to service its debts as the coronavirus pandemic grounded most of its fleet and starved it of cash.
Virgin has ambitions to eventually return to the Australian stock exchange, which it delisted from on November 17, 2020 after coming into the full control of private equity giant Bain Capital. It has not given a timeframe for when it plans to float and said it is a matter for shareholders. Bain Capital owns about 93 per cent of the business, while Richard Branson-founded Virgin Group owns about 5 per cent and Queensland Investment Corporation owns the remaining 2 per cent.
While the airline expects to turn a profit again at the end of the current financial year, it will have to carefully manage its expenses, which increased 76 per cent to nearly $4.8 billion and weighed on the bottom line as its fuel bill rose by $728.3 million, or 146 per cent, to $1.2 billion. Labour costs and airport charges also rose 61 per cent to $3.5 billion. All of these factors are expected to continue this and next year, particularly as the war in Israel pushes up global oil prices.
Virgin has not paid any corporate tax in the past 10 years, according to responses provided to Senate questions answered on notice. The cumulative effect of several years of losses saw airline’s net liabilities swell from $730.9 million to $1.36 billion.
Virgin customers are sitting on approximately $114 million in unused COVID credits that will expire on June 30, 2025.
Virgin’s financial figures are dwarfed by the numbers of its rival Qantas, which reported a record $2.5 billion in underlying profits during the same period.
The aviation industry has faced heightened scrutiny over the past year amid persistently high airfares and cost-of-living concerns.
The Senate inquiry into the federal government decision to block Qatar Airways’ application to double flights yesterday released its final report, which recommended the government immediately review its decision, a position that Virgin welcomed.
“A reversal could deliver benefits as early as Christmas for Australians seeking to travel to Europe, the Middle East and Africa, for the tourism industry and Australian exporters,” a Virgin spokesperson said.
Since September last year, Virgin has had a codeshare agreement with Qatar Airways. This means Virgin would materially benefit if Qatar’s bid to add 21 extra flights a week to Australia were successful.