It’s taken a while but for Bain Capital, the private equity firm that bought Virgin Australia out of administration, it must feel like a very sweet payday. Last week, rival Qantas riled customers but delighted shareholders by forecasting a massive earnings comeback, and now all systems point to Virgin’s numbers to be (proportionately) similar.
Last month Virgin’s chief executive Jayne Hrdlicka, said the airline would be profitable in 2023. But if Qantas’ updated guide is any indication, Virgin should be up for a revenue bonanza in the six months to the end of December. That’s precisely the kind of performance Bain needs to sell down a portion of its stake and return Virgin to the ASX via a listing.
The market is already salivating over the prospect of an IPO next year. Whether this timetable is achievable will be informed by the performance of the stock market. IPO activity has almost disappeared since the start of 2022 thanks to market volatility.
Bain Capital picked up the keys to Virgin two years ago, and six months into the pandemic that tipped Australia’s second-largest airline into insolvency. At that stage, the world had only experienced the first wave of COVID and things were expected to return to normal by the end of 2020.
It’s taken a further 18 months for the airline industry to recover, but it has done so with a vengeance.
Virgin Australia CEO Jayne Hrdlicka says the aviation rebound is here to stay. Credit:Dan Peled
Virgin’s chief executive, Jayne Hrdlicka, fronted a tourism conference on Thursday displaying an elevated level of confidence that the airline industry’s bounce back is sustainable, rather than a “sugar hit” resulting from pent-up travel demand, unleashed as travel restrictions were eased.
Nor did she seem fazed by the prospect of a weaker economic outlook, one that logic says would dampen demand for air travel.
Virgin booking an impressive profit in the current half to December is now a sure bet, based both on customer demand and the higher airfares that airlines have been able to extract from desperate travellers.
After a catastrophic couple of years, airlines are now in the sweet spot in an earnings sense. And that’s despite the sky-high cost of jet fuel.
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