VIRGIN AUSTRALIA: Earnings up 28% on full years earnings

Australia’s second airline, Virgin Australia occupying 34% of the market, re-listed on the Australia Stock Market (ASX) on June of this year. In its first public reporting of its full years earnings, it recorded an increase of 28% to $664.4 million. It also predicts a rosy future for increased revenues and profit in the future due to disciplined cost management.

Bigger, leaner and more profitable

Virgin has also grown its margins to 9.6%, that two percentage points up from last year. It plans a 4% expansion in capacity in the first half of financial year 2026, starting with 5% growth in the first quarter, follwed by 3% in the second.

There won’t be any capacity wars with Qantas and Jetstar, or so they say. CEO Dave Emerson affirmed that Virgin wishes to maintain is approximately one third share of the Australian domestic market. It will continue to target the same base consisting of small business, value-conscious corporate customers and leisure travellers.

Loyalty

Airlines no longer totally depend on flying for their income. Loyalty has become an important income stream. The Velocity program of Virgin Australia continues to grow with income rising by 10.5% to $127 million. That’s still a drop in the ocean compared to the leviathan program of Qantas, but a greater than 10% improvement is no allergic reaction.

Fleet Refresh

Virgin runs an enviable fleet of Fokker 100s, mainly servicing mining routes in Western Australia. Virgin plans to replace these with more fuel efficient with Embraer E2s. They will also provide more passenger comfort, a business class cabin and WiFi.

Competition with Qantas & Jetstar

Qantas Group reported its results a day earlier. On average fare charged, they are doing better than Virgin. Qantas fares rose by 6% year-on-year, while Jetstar sits at an impressive 8%.

At 4%, Virgin Australia is the laggard. It’s possible to argue that the Virgin Australia market of leisure travellers, value conscious corports and small busimness is more price sensitive than Qantas.

2PAXfly Takeout

Although the results were good, the market hoped for better, or at least that seems to be the market message, since Virgin Shares dipped by 2% on the day of announcement, falling to AU$3.43. Alternately, this may reflect the markets view of potential for future growth.

Virgin Australia is preparing for some quiet growth, while acknowledging that the price of doing business like, airport charges might come in ahead of inflation.

Still, Virgin, like Qantas will take its share of what appears to be undiminished demand for air travel, both domestically and internationally by Australians.