Virgin Australia has surprisingly reported a $3.7 billion after-tax profit for the year ending 30 June 2021, the airline’s first in nearly a decade, after the airline clawed its way out of administration.
The result is a significant improvement on its 2019-20 financial year results that saw Virgin report a $3 billion loss. However, this year’s profit comes largely off the back of the $4.4 billion in creditors’ claims that were extinguished by its administrators, following the sale of the airline to US private equity firm Bain Capital in November 2020.
The figures are also bolstered by Virgin’s acceptance of $205 million in JobKeeper in the 2020-21 financial year, while the airline also managed to halve its labour costs by the end of 2020, after making more than 3,000 staff redundant and axing budget subsidiary Tiger.
Overall, Virgin saw an underlying before-tax loss of $76.8 million – marking perhaps a better indicator of Virgin’s financial performance in the year to 30 June.
This figure excludes over $600 million in impairment charges, redundancies, penalties, foreign exchange losses and the $110 million spent on administration costs to Deloitte.
In the year to 30 June, revenue fell by nearly 70 per cent due to intermittent border closures, from $4.5 billion in 2019-20 to just $1.5 billion, however Virgin claimed it was similarly able to cut down expenditure, also by 70 per cent.
Domestic passenger and freight revenue together fell from $2.6 billion in 2019-20 to $983.3 million in the year to 30 June, while international sales fell from $966.2 million down to just $8 million.
Meanwhile, the airline’s regional operations bolstered Virgin’s bottom line throughout the pandemic, with revenues up 23 per cent year-on-year to $215 million.
Like others in the industry, Virgin is preparing to soon see a meaningful recovery in the aviation sector, which will hopefully improve its financial position in the next financial year.
According to Virgin chief executive Jayne Hrdlicka, the airline is anticipating a “swift and significant ramp-up” in travel demand in the coming months, as both domestic and international borders continue to ease, “and as Australians come to live with COVID-19 circulating in the community”.
“The group will adjust capacity in the market back up to meet this demand and is well-positioned to do so,” she said.
“International flying continues to remain part of the group’s strategy, with international flights scheduled from December 2021 in line with reopening roadmaps announced by respective state and federal Australian governments.”
The news comes two weeks after Virgin announced it had signed letters of intent to welcome an additional seven Boeing 737 Next Generation aircraft to its fleet, and is preparing to stand all of its staff back up by December.
The airline also said it will begin recruiting for “hundreds of new roles” in preparation for an increase in flight demand, as Australia begins to ease its remaining border restrictions.
It all comes just one year after Virgin was officially relaunched under the ownership of Bain Capital, and 19 months after the struggling airline first entered administration.
Since the airline relaunched one year ago, Virgin has announced plans to increase its 737 fleet by over 45 per cent from 58 to 84 Boeing workhorse jets.
“This fleet growth underlines the confidence we have in the future of our business and the industry, generally,” Hrdlicka said. “Vaccination rates are rising, borders are opening, and demand is returning.”
The airline chief executive said she is “really positive” about the current state of planned borders reopening and confirmed Virgin’s intentions to continue snatching market share from its biggest rival, Qantas.
“We have used our time well while the industry was quiet and are well advanced on all aspects of our transformation strategy and we fully intend to continue growing with demand to ensure we operate at roughly 33 per cent of the domestic market,” she said.
“This enables us to continue to deliver the right mix of destinations with high frequency to support both our business and leisure purpose guests. It also means continued jobs growth at Virgin Australia and our team are delighted to be welcoming new family members to the organisation.”
The airline is preparing to welcome an additional 600 new members to its workforce in the coming weeks and months, with advertisements already up across five states for roles in engineering, pit crew, cabin crew and corporate.