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Virgin sees first after-tax profit in nearly 10 years

written by Hannah Dowling | December 1, 2021

Virgin Australia 737-8FE VH-YIV
A Virgin Australia 737-8FE lands at Melbourne YMML. (Victor Pody)

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.

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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”.

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“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.

Comments (7)

  • Rod Pickin

    says:

    Yes it is great that VOZ is in the black big time but as they say, the optics aren’t great. I am appalled that Oz taxpayers monies have allowed the company, now fully overseas owned, to rise from the depths of financial ruin to the tune of a AU$3.7B after tax profit when pre Bain owners and shareholders et al most likely are hanging out at meals on meals or similar. Naturally what Bain has done is squeaky clean, legal and in the business world, acceptable but morally quite questionable and I am sure that in the commercial atmosphere customers may well choose more carefully where to expend their hard earned cash in time moving forward. Sorry, but I am not impressed.

  • Mike F

    says:

    Replace the first profit in ten years with the first profit since Brett Godfrey left (apologies to Paul Scurrah who was trying to fix the sinking ship but ran out of time).

    Any of us that worked there know where the problem was and it was in an Armani suit

    • Rod Pickin

      says:

      Hi Mike, actually I thought I saw him the other day in Lowes. Oh, how the mighty have fallen.

  • Gordon Cumming

    says:

    It is great that Virgin is slowly coming out of the loss making it has experienced in the past However, it is wrong to say that they made a profit given the content in the article. There is still a long way to go and will be further complicated by Bains stated desire to only hold this asset for only two years. So only time will tell.

  • Vannus

    says:

    Yeah, but at literally what cost to so many?

    Bain’s a disgrace of an owner, & my empathy is with the hard working staff at the coal face.

    There’s more to looking good on paper for a company, & this one, under Bain’s stewardship, ain’t got it at all.

  • Duncan Watkinson

    says:

    Easy to show a profit when you ‘write-off’ all your debt. Creative accounting at it’s very best!

  • Joseph Ken

    says:

    Virgin making a huge profit is very funny. Deloitte have assisted them to write off debts and even some bond holder did not get paid at all. Australian tax payers money was given to Virgin as JobSeekers funding.
    I am very sure some truth is hidden is the almost $4.0bil profit after tax.

    Are they building a con platform for an IPO so that 50 percent of the Virgin can be offload to investors and Bain Capital can make a huge gain on their initial investment.

    Australians will be stupid to invest?!?

    I think six months after the IPO, Virgin will report down graded profit and blame on fuel cost and border restrictions.

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