VIRGIN AUSTRALIA: Bain Capital makes AU$1 Billion dollars out of airline – already.
Over the last few days, some of Virgin Australia’s (VA) finances have been reported publicly. VA does not need to conform to the strict accounting and reporting strictures of companies listed on the Australia Securities Exchange (ASX), so it can be more selective about what it reports.
Virgin revealed on Monday that their income had increased by 18% over the last 12 months. After administration, Virgin Australia had a second year of profit under Bain’s ownership. That’s sure a turnaround from a decade of losses. Pretty good news, but wait …
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Profits even bigger
Now, we have access to the accounts supplied to the Australian Securities and Investments Commission (ASIC). These show a whopping 300% increase in profit of AU$545.4 million. Part of that is that VA has been able to bank AU$280.7 million in expired flight credits.
Virgin Australia has turned into a cash machine for private capital owner Bain. Last year, VA returned AU$730 to its investors. This year, it paid dividends to shareholders of AU$366.5 million. Sounds pretty good? Just remember that Bain Capital stumped up AU$700 million of investment when it took VA out of administration and also took on billions in liabilities.
Profit from what activities?
Virgin Australia boosted its earnings to AU$ 519 million before interest and tax. Its revenues grew by 6.8% to a whopping AU$5.4 billion.
The largest increase came from the loyalty area or frequent flyer scheme, which rose by 23.8%. Flying revenues lifted by 2.6%.
Virgin Australia shareholders
Virgin Australia’s shareholding basically breaks down as follows:
- Bain Capital 93%
- Virgin Group 5%
- Queensland Investment Corporation 2%
So, that is how those dividends are cut.
Who else besides Bain Capital got a payday
VA’s management also did handsomely—not handsomely in an Alan Joyce sense, but good enough. CEO Jayne Hrdlicka, CFO Race Strauss, and Velocity loyalty’s Nick Rohrlach were paid AU$5.4 million in salaries and other benefits combined. Jayne Hrdlicka resigned in February 2024 but will stay on until a new CEO is appointed.
2PAXfly Takeout
Looks like Jayne Hrdlicka will miss out on the bumper bonus from an IPO listing though. VA had planned a roadshow to sell the IPO, but that plan was abandoned in April last year, undoubtedly, much to the chagrin of the appointed investment banks Barrenjoey, Goldman Sachs and UBS.
Maybe she is up for a success bonus if the deal to sell a 25% stake in Virgin Australia to Qatar Airways gains approval from the Foreign Investment Review Board and the federal government. The deal also involves Virgin Australia resuming long-haul flying. That will be achieved through wet leasing Middle Eastern Airlines Qatar’s Boeing 777 aircraft and flying them to the Qatari base in Doha.
It’s regarded as a very smart move involving no investment in new aircraft, bases, or additional staff to achieve a long-haul network. It also works for Qatar, which has been thwarted once in its attempt to increase its services to Australia. They are still waiting on the result of a second application sitting with the Minister for Transport, Catherine King, who should now consider herself snookered.
Virgin Australia is a poorly run airline that demonstrates the worst of venture capitalism and is no competition to Qantas. I recently flew virgin from Sydney to Perth, it was about $50 cheaper than Qantas, a 5 and a half hour flight to Perth that departed 35 minutes late. I was seated 2 rows from the back, could smell the toilets, the inflight service offered was a free paper cup of water and everything else was extra charge. Basically worse than Jetstar in every way….once the Qatari government owns Virgin Australia perhaps they might offer a smigin of the service that Qantas does???
I hear you!