Virgin Australia IPO: the complete investor's guide

Virgin Australia (VGN) returns to the Australia 200 (ASX 200) at A$2.90 per share on 24 June 2025 after a transformative restructuring under Bain Capital's ownership. The IPO presents opportunities but also carries significant risks for investors.

How Virgin rebuilt after collapse

Virgin's 2020 administration wiped out equity holders, but Bain Capital used the crisis to reset strategy, cost base and culture. The airline that now seeks a fresh listing is not the same business investors once knew. 

1. Financial turnaround: first statutory profit (A$129m) in a decade for FY-23 and forecast A$330m underlying NPAT in FY-24
   
2. Fleet simplification: transition to an all-737 family (-800 and MAX 8) is cutting maintenance and training costs
   
3. Domestic market share: 31.2% of seats in June 2025, up from 21% pre-COVID
   
4. Golden Triangle strength: Sydney–Melbourne–Brisbane routes generate roughly 45% of revenue
   
5. Capital-light long-haul: wet-lease pact with Qatar Airways adds 28 weekly Doha services at minimal capex
   
6. Velocity loyalty: 13 million members, 80 partners – a key source of ancillary revenue

Four structural tailwinds investors should know

Management argues that Virgin now has durable advantages versus both its 2020 past and rival Qantas. These positives frame the bull case:

1. Cleaner balance sheet: net leverage below 1× EBITDA provides headroom Qantas lacks while re-fleeting
2. Domestic duopoly: Rex's retreat and Bonza's collapse leave two major carriers, supporting rational pricing
3. Capital-light international reach: Qatar partnership offers >100 onward destinations with no aircraft on Virgin's books
4. Relative discount: the offer comes at ~7× forecast FY-25 earnings versus Qantas on ~10×

Valuation in context: Virgin versus Qantas

Virgin Australia’s IPO pitch includes a headline valuation of around 7 times its forecast earnings for FY-25. That looks cheaper than Qantas, which trades at around 10 times. But what does that actually mean — and is it a fair comparison?

• Revenue gap reflects scale

Qantas remains the much bigger airline. In the 2024 financial year, it earned A$20.3 billion in revenue, nearly four times more than Virgin at A$5.4 billion. This size advantage gives Qantas more room to absorb shocks like fuel price swings or demand drops.

• Profit margin difference is even wider

Qantas also reported underlying net profit after tax (NPAT) of A$1.9 billion, while Virgin came in at A$330 million (excluding a one-off windfall). This shows that Qantas is more profitable overall, even adjusting for scale.

• Virgin’s cleaner balance sheet

One area where Virgin comes out ahead is debt. Its net debt to EBITDA ratio is 0.9×, compared to 1.9× for Qantas. This means Virgin has more financial flexibility, which could matter if conditions turn turbulent again.

• So is Virgin cheap?

Yes — on a headline price-to-earnings (P/E) basis, Virgin looks like a discount option at ~7× FY-25 earnings vs Qantas at ~10×. But investors should be cautious: the lower price may also reflect Virgin’s smaller scale, thinner margins, and mid-market positioning. As always, context matters.

_{* Qantas FY-24 year-end 30 Jun 24; Virgin FY-24 year-end 31 Mar 24 per prospectus
** Excludes A$278 million one-off cancelled-credit recovery}

Five red flags that still matter

For every supporter there is a sceptic. These points highlight why some brokers place fair value nearer A$2.40–2.60.

While Virgin Australia has made significant strides, the IPO still carries noteworthy risks:

• One-off boost: cancelled-credit break-back lifted FY-24 profit by A$278m – a non-repeatable windfall
• Secondary-only deal: IPO proceeds go to Bain, not the company; growth must be self-funded
• Mid-market squeeze: Virgin straddles budget and full-service niches; mispricing by Jetstar or Qantas could pinch yields
• Debt is back: A$1.31bn net debt remains, equating to ~A$0.54 per share of enterprise value
• Cyclical reality: airlines remain hostage to fuel prices, wages and macro shocks as seen during Virgin's first stint on the ASX where the airline saw a 90% peak-to-trough fall

Bottom line

Virgin Australia re-emerges with a repaired balance sheet, a powerful loyalty business and a pragmatic long-haul strategy that leverages its Qatar Airways partnership without heavy capital outlay. It holds a solid 31% domestic seat market share and has simplified its fleet, reducing costs and improving efficiency.

However, headline earnings are flattered by a one-off credit recovery, and none of the IPO funds will go towards growth — they go entirely to Bain Capital's exit. With A$1.3 billion in net debt and a business model straddling both budget and full-service territory, Virgin still faces structural challenges.

Investors must weigh the appeal of a cleaner, leaner Virgin against the reality that airlines remain highly cyclical, and that this IPO is not raising fresh capital for innovation or expansion. The post-listing performance will hinge on whether Virgin can consistently deliver earnings without the benefit of one-offs — and whether the market believes it deserves to close the valuation gap with Qantas.

_{Produced with input from IG’s editorial team and AI technology. This guide is not investment advice. Always review the prospectus in full and seek independent advice before investing.}