Virgin Australia Holdings expects to return to profitability in the current financial year as it benefits from better domestic market conditions and begins a major revamp of its international division, including switching some flights to Bali to low-cost arm Tigerair Australia.

Virgin said its return on invested capital, which was 6.1 per cent in the last financial year when it reported an underlying pretax loss of $49 million, would meet its 10 per cent cost of capital this year and was expected to exceed it in the 2016-17 financial year.