Additionally, Virgin doesn’t have a significant position in the international aviation market and therefore has not been implicated in the government’s controversial decision to block Qatar from bringing extra flights from the Middle East and Europe into Australia.

But like Qantas, Virgin has seized on the strength in post-COVID demand and the lack of capacity, particularly in the first half of the financial year to lift airfares, or in airline speak, experience strong yields.

There is plenty of accounting noise in the Virgin 2023 accounts – there are flight credits owed to customers from before the airline was placed into administration in 2020 and there are COVID credits of roughly $120 million still awaiting redemption.

There is also the fact that a shareholder, presumably Bain which bought the airline out of administration, took an early dividend of $730 million during the year in the form of a capital return.

Also, accumulated losses mean that Virgin paid almost no tax.

Thanks to a series of one-off costs incurred as the new owners, which ploughed money into Virgin’s operations to restructure everything from IT to lounges, and took hits thanks to fleet writedown, the statutory pre-tax profit of $135 million arguably doesn’t reflect the airline’s underlying strength.

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If one sees through these, Virgin reported an underlying profit of about $440 million. Its last full-year result before COVID came in at an underlying loss of $71 million.

A large element to the performance turnaround and the reason that profits should be more reliably sustainable is Bain’s move to rebase the airline’s costs. Virgin’s earnings (and losses) in the 10 years before it was placed into administration has been patchy, which was in part due to elevated costs and investments made under the previous management.

It had been a great airline for customers but not for shareholders. The revived Virgin is now pitched more in the middle, fewer bells and whistles but not a budget brand like Jetstar either.

But the new Virgin is not immune from the litany of risks that have presented themselves courtesy of the senate inquiry into the Qatar decision.

The inquiry has focused attention on the landing slot system that has entrenched the domestic duopoly, and any change to the status quo could be negative for Qantas and Virgin.

It has also shone the spotlight on the need for the Australian Competition and Consumer Commission to continue to monitor domestic and international airfares, and further has recommended the government direct the regulator to conduct an inquiry into potential anticompetitive behaviour in the domestic aviation market.

The federal government has also been asked to implement consumer protection reforms to address significant delays, cancellations, lost baggage and devaluation of loyalty programs.

While Qantas was the Senate’s chosen target, any of these changes coming to pass has the potential to inflict collateral damage on Virgin.

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