Virgin Australia’s FY25: How Did EBIT Jump 28% While Profit Fell 12%?

Financial Performance Highlights

Virgin Australia Holdings Limited has released its financial results for the year ended 30 June 2025, revealing a mixed but largely positive performance. The airline posted a 3% increase in revenue to $5.81 billion, driven by strong passenger demand and growth in its loyalty program. Underlying earnings before interest and tax (EBIT) surged 28% to $664.4 million, reflecting disciplined cost management and benefits from its ongoing Transformation Program.

However, statutory net profit after tax declined 12% to $478.5 million. This reduction was primarily due to one-off costs related to the company’s initial public offering (IPO) and the strategic investment by Qatar Airways Group, which together amounted to $115.9 million. Additionally, the prior year benefited from a $277.9 million gain from the expiry of Future Flight Credits, a non-recurring item not repeated in FY25.

Operational and Strategic Developments

Virgin Australia carried 20.7 million passengers across its domestic and international network, marking a solid operational performance. The airline improved its domestic on-time performance to 76.8% and completion rate to 98.4%, both significant increases over the previous year. These metrics underscore the airline’s focus on reliability and customer experience.

The company’s fleet grew modestly, welcoming five new aircraft and retiring two older models. Notably, Virgin Australia accelerated its fleet renewal program with the induction of eight Boeing 737-8 Max aircraft, which offer improved fuel efficiency and reduced noise. The Embraer E190-E2 was also introduced to replace older regional jets, supporting the airline’s sustainability goals by reducing emissions by approximately 30% compared to the outgoing fleet.

Loyalty Program and Transformation Progress

The Velocity Frequent Flyer program remains a key growth driver, with membership expanding by 12% and nearly 900,000 new members joining in FY25. The program’s revenue grew 10% to $450 million, supported by new product launches such as American Express financial services and partnerships like DoorDash. Velocity’s underlying EBIT margin held steady at 28.3%, reflecting strong engagement and effective reinvestment into growth initiatives.

Virgin Australia’s Transformation Program continues to deliver substantial benefits, with gross gains exceeding $450 million in FY25. The program targets $950 million in gross benefits by December 2026 through revenue enhancements, cost optimization, and loyalty program improvements. Management remains confident in the program’s ability to drive further margin expansion.

Balance Sheet and Capital Management

The balance sheet showed improvement, with net liabilities decreasing to $814.6 million from $1.18 billion the prior year. This was aided by the recognition of deferred tax assets totaling $343.2 million and strong operating cash flow of $1.14 billion. Virgin Australia secured a $500 million revolving credit facility in June 2025, enhancing liquidity and financial flexibility post-IPO.

Despite the net liability position, management affirms the company’s going concern status, supported by robust cash flow forecasts and ongoing operational growth. The company did not declare a final dividend for FY25, reflecting a cautious approach to capital allocation amid transformation and fleet investment.

Looking Ahead

Virgin Australia is positioned for continued growth, leveraging its refreshed fleet, expanding loyalty program, and strategic partnership with Qatar Airways. The airline’s disciplined capital allocation framework prioritizes balance sheet strength, investment in growth opportunities, and shareholder returns when appropriate. Investors will be watching closely how the Transformation Program’s next phases unfold and how the company navigates competitive and economic challenges in the aviation sector.