Source : THE AGE NEWS
Virgin has posted a jump in half-year earnings supported by strong revenue growth and demand in the leisure sector. The company also signalled two years’ worth of new initiatives for its loyalty program, Velocity.
Virgin’s pre-tax earnings rose 11.7 per cent to $490 million in the six months to the end of December.
“Passenger demand remains strong, with consumers continuing to prioritise travel and connectivity, supporting the airlines segment,” Virgin chief executive Dave Emerson said on Friday.
The airline said that its first-half results were “underpinned” by $200 million in gross benefits from continued progress in the group’s transformation – a program to diversify product offerings and cut costs. With savings on fuel costs, the productivity gains partly offset inflationary headwinds, expanding the underlying pre-tax margin by 40 basis points to 14.8 per cent.
Underlying net profit rose to $279 million, up 20.7 per cent on the first half. Nevertheless, the Brisbane-based airline noted that “cost pressures persist across the industry” and that costs were growing “above inflation in several areas”, including the supply chain, “airport charges and aircraft maintenance”.
Virgin is well hedged in fuel costs and currency – which will help to insulate it from future price shocks in those areas. On future cost pressures, Emerson singled out airport landing fees.
“Those have been escalating steadily,” he said. “They are now our second-largest cost item, and they’re projected to grow in multiples of inflation. We really need to make sure that travel remains affordable.”
Virgin paid $629.2 million in the first half of fiscal 2026, up $77.5 million on the first half of 2025.
Two years of Velocity enhancements
Speaking a day after Qantas signalled a shift in its loyalty program, Emerson acknowledged the increasing focus on competition in this area.
Virgin’s loyalty program Velocity will continue to “be a growth engine for us”, Emerson said, with growth rates well above GDP growth.
Velocity revenue grew by 18.8 per cent in the half, turning in a pre-tax profit of $74 million, a jump of 14.8 per cent over the first half of 2025. Emerson also hinted at new changes to come.
“We have a whole raft of initiatives lined up over the next 24 months,” he said, without elaborating given the “very competitive market” Virgin faces against Qantas and its extensive lounge network.
Earlier this week, Velocity signalled a status credit promotion allowing members to reap 125 bonus status credits on past and future bookings.
The program will also have a new boss, as Andrew Cleary takes over from Nick Rohrlach.
Looking ahead
CFO Race Strauss said the company anticipates continued growth in both revenue and underlying earnings for fiscal 2026, “driven by strong travel demand, the impact of our transformation program, and sustained growth in Velocity”.
“We’re confident we will continue to see earnings accretion in the second half,” Strauss said.
Emerson said that the benefit from Virgin’s transformation plan has room to run before it becomes “a little incrementally harder to find the next thing”, but Virgin is “not at that point yet”.
“The flipside is that new technology changes that equation, and so when completely new tools like AI come in, they can unleash a new wave of opportunity in transformation that otherwise would not have been there,” the CEO said.
Virgin is already using AI to support its call centre and other areas, he said.
However, the total impact of AI on Virgin is as-yet unknown, said Emerson.
Taxes paid
Since exiting administration, Virgin has fully utilised past tax losses, and the company is in a “tax paying position”. Consequently, net profit after tax fell in the half by 27.9 per cent to $341 million over the first half of the 2025 financial year.
Earnings per share fell 33.5 per cent over the first half of the financial year to 43¢. “The changes … reflects the movement in underlying and statutory net profit after tax and the dilutionary impact of share options and share rights associated with the IPO [initial public offering],” the company said.
The company, of which 30.2 per cent is owned by Bain Capital, relisted on the ASX in June.
“This is the last of the tax deductions related to the administration falling off, so we’re back onto a normal operating footing for Virgin,” Moomoo ANZ market strategist Michael McCarthy said.
“Overall, the results were good. It’s a tough business – airlines – and they’ve managed to increase profit by more than 20 per cent. Although the operating environment has improved.
“Virgin has clearly trimmed its sails and is taking advantage of a better operating environment.”
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
Chris Zappone is a senior reporter covering aviation and business. He is former digital foreign editor.Connect via X, Facebook or email.
