Virgin Australia back in black after 11-years of losses

Virgin Australia has pushed plans for an IPO into the new year after posting a full year profit only marginally higher than its first half result.

Virgin Australia CEO Jayne Hrdlicka at the launch of the airline’s flights from Cairns to Tokyo. Picture: Brendan Radke

Virgin Australia has pushed plans for an initial public offering into the new year after posting a full year profit only marginally higher than their first half result.

The $129m net profit was the first full year gain for the airline in 11 years, and represented a dramatic improvement on last year’s $565.5m loss.

Healthy demand for leisure travel and small and medium enterprise business travel helped deliver the result, which built on the first half profit of around $125m.

Airline insiders put the significantly smaller second half profit down to a “normalisation” of supply and demand, and a major workforce expansion.

Over the reporting period, more than 1800 frontline staff were hired by Virgin Australia, lifting the airline’s workforce to 7340.

CEO Jayne Hrdlicka said the profit was “an important milestone” for Virgin Australia and signalled that the airline’s transformation under owners Bain Capital was progressing well.

“We have a long-term commitment to transformation and are only part-way through this multi-year journey,” Ms Hrdlicka said.

“By creating a systemically lower cost base and a conservative balance sheet as well as investing heavily in technology and our frontline, we are well positioned for the future.”

The Velocity loyalty business generated $330m in revenue and $77m in earnings before interest and tax, after growing its membership to 11.5 million people.

A financial report lodged with the Australian Securities and Investments Commission noted that $8m had been spent on legal advice and other preparations for an IPO.

Despite the outlay, it was expected Bain Capital would delay a public float until early 2024 in the hope high oil prices would ease and Virgin Australia would record another strong half-year result.

The report also revealed a $730m capital return paid to Bain Capital and minor shareholders Virgin Group and the Queensland Investment Corporation in May, was partly funded by a $300m bridge loan.

According to the report, the loan had a maturity date of May 2025 but “was required to be repaid from the initial primary proceeds in the event of an IPO which is expected to occur earlier”.

Bain Capital declined to comment on the Virgin Australia result or offer any details of when the US private equity firm would relist the company on the ASX.

Unions seized upon the return the profit, calling on Virgin Australia to now recognise the sacrifices made by employees to help the airline out of administration in late-2020.

Flight Attendants Association of Australia federal secretary Teri O’Toole said they were glad the airline had “found its way out of the darkness” but it was time to reward workers.

“We’re seeking to make sure that cabin crew are no longer on the bottom of the ladder after three years of reduced pay and conditions because of the position Virgin found themselves in,” Ms O’Toole said.

“Cabin crew stuck around to bring them back into profit, and the profits made on the back of workers need to be shared.”

Virgin Australia has flown back into profit under owners Bain Capital after 11-years in the red.

The Transport Workers Union took a similar view, warning Virgin Australia and Bain Capital their employees’ patience was running out.

TWU national secretary Michael Kaine said it was “high time the airline held up its side of the bargain by recognising workers publicly, financially and by listening to their concerns”.

“This financial return was generated by workers for whom ‘under the pump’ is an understatement,” Mr Kaine said.

“Despite struggling on award minimum pay rates, Virgin Australia ground crew and cabin crew have worked themselves to the bone servicing aircraft on skeleton staff, often missing breaks to get the job done.

“Pilot and cabin crew fatigue is through the roof, with inadequate rostering systems adding to the headache.”

It was expected the airline would seek a further 1500 staff in the current financial year as customers “continued to prioritise travel in the face of cost-of-living pressure”.

Chief financial officer Race Strauss said Virgin Australia’s balance sheet was now considerably stronger and the cost base of the business had improved significantly from recent years.

“Virgin Australia is now in a strong capital position with total debt including leases at $2.3bn and over $1bn of cash on balance sheet, providing the platform for future investment in transformation and growth,” Mr Strauss said.

The airline’s return to profit came in a year when numerous carriers were making more money than ever, with Qantas recording a record $1.7bn gain.

Singapore Airlines achieved a record $2.4bn net profit in the year to March 31, and Emirates posted a history-making $4.6bn result.