Summary
- Virgin Australia has achieved a surprising turnaround, posting its first profit in eleven years, with a net profit of AU$129 million for FY23.
- The airline’s success could be attributed to increased travel demand, efficiency initiatives, and a commitment to transformation and technology investment.
- Virgin Australia’s airline business and loyalty business each experienced significant revenue growth, with plans so as to add more frontline staff to fulfill customer demand.
Earlier this yr there was much talk of Virgin Australia launching an Initial Public Offering and re-listing on the stock exchange, returning a windfall to its backer Bain Capital. The announcement today that the airline had delivered its first profit in eleven years may revive the market chatter that has gone quiet in the previous few months.
Photo: Virgin Australia
A surprising turnaround in FY23
For the primary time in eleven years, Virgin Australia today announced it had recorded a statutory net profit after tax of AU$129 million ($85m) for the financial yr ended June 30, 2023 (FY23). Revenue soared by 124% year-on-year to achieve AU$5 billion ($3.3b), while the profit was a big turnaround on the FY22 lack of AU$565.5 million ($373m).
Since its rebirth in late 2020, Virgin Australia (VA) has been working on a multi-year transformation plan, and the fruits of which are shown in its underlying earnings before interest and tax (EBIT) of AU$439 million ($290m), a margin of 8.8%. The airline said the result was driven by record travel demand for leisure and the return of small and medium enterprise travel to pre-COVID levels.
Photo: Michael Doran I Easy Flying
It added that efficiency initiatives delivered a big increase in profitability despite higher fuel prices, and the airline is seeing healthy demand as customers prioritize travel within the face of cost-of-living pressure. CEO Jayne Hrdlicka said the outcomes are a vital milestone for Virgin Australia and signal that the transformation is progressing well.
“We’ve got a long-term commitment to transformations and are only part-way through this multi-year journey. By making a systemically lower cost base and a conservative balance sheet in addition to investing heavily in technology and our frontline, we’re well positioned for the long run.
“Our investment in frontline transformation continues, and is designed to spice up capability, customer experience and operational efficiency. Our recent announcement of an [AU]$110 million ($73m) cabin upgrade, arrival of the primary of our recent 737-8 aircraft, market leading baggage tracking app and Rapid Rebook technology launch all help us to create experiences our guests love.”
The primary 737 MAX 8 will likely be joined by one other seven in FY24, with an extra 25 737 MAX 10s planned for delivery from FY25. The present Boeing 737s may have their cabins refurbished within the variety of the new-generation 737 MAX narrowbodies to make sure customer experience is maintained at the identical high level across the fleet.
The airline business is prospering
Virgin Australia’s Airline business, which incorporates domestic, international, and regional and charter flying, increased revenue by 126% to AU$4.87 billion ($$3.2b). The segment recorded underlying EBIT of AU$362 million ($239m) at a margin of seven.4%
Photo: John Mackintosh I Shutterstock.
Loyalty business Velocity increased revenue by 68% to AU$330 million ($218m) with an underlying EBIT of AU$77 million ($51m) and a 23.4% margin. Velocity revenue was boosted by significant numbers of latest members joining in FY23, reaching a record 11.5 million members.
In FY23, Virgin Australia hired greater than 1,800 frontline staff, which increased the whole headcount to 7,340. To satisfy the continued high customer demand the airline plans so as to add around 1,500 more frontline staff in FY24, greater than doubling staff numbers in comparison with the airline’s darkest days in 2020.
What do you’re thinking that of Virgin Australia’s turnaround? Tell us within the comments.