Webjet CEO flags ‘challenging’ environment as Virgin cuts commissions

Travellers looking for cheap flights on Webjet may find fewer airfare deals in the future after Virgin Australia slashed the commissions it pays the online travel agent to cut out the middleman and send consumers directly to its own booking site to maximise sales.

The airline’s move is compounding headwinds for Webjet, which warned investors on Wednesday that operating conditions will remain “fluid and challenging” amid the ongoing war in the Middle East, inflation pressures and low consumer sentiment.

The company, which posted a 20 per cent earnings slump for the year through March, is scrambling to keep up with technology and is battling upheaval in its management ranks.

“Virgin Australia, one of our key partners, has advised us that with effect from the first of July, they will substantially reduce their commission streams and commercial arrangements with us,” CEO Katrina Barry said after the release of the travel agent’s full-year profits. “They’re still a valued partner, but this does have a significant impact.”

The company warned that its results for fiscal year 2027 are expected to be “materially impacted” by lower airline commissions.

The news sent Webjet shares skittering. They closed down 11.2 per cent at 43.5 cents at the end of trading.

If the airline had already cut its commissions in fiscal year 2025/26, it would have cost Webjet $3 million in revenue, the company said.

Virgin confirmed the commission cut, saying it “regularly reviews its commercial arrangements to ensure we remain competitive and continue delivering value for our customers in a highly dynamic aviation market.”

Meanwhile, Qantas said its commission arrangements with the travel agent aren’t changing.

Webjet’s underlying pretax earnings fell to $28.1 million in the 12 months to March 31, down from $35 million in the previous year, due to “a challenging macro environment and softer trading conditions”, the company said in a statement to the ASX.

“Look, it was a tough year, and with softer trading than expected in patches,” Barry said, with the Iran war and the resulting oil price shock having a marked effect on holiday bookings.

“We continue to see leisure travel in Australia constrained by elevated airfares and low consumer confidence and leisure travel internationally flowing towards shorter-haul Asia and Pacific destinations,” she said.

Across the entire group – which also includes Trip Ninja, cars and motorhome rental, and business travel units – bookings were down to 1.4 million in 2026 from 1.5 million the previous year. The total transaction value slipped to $1.46 billion from $1.5 billion.

Within its online travel agency sector, revenue was flat at $115.3 million, essentially unchanged from the previous year.

Domestic flight bookings were down 10 per cent, “impacted by elevated fares and pressures”, while international flight bookings rose 1 per cent, “with growth skewed to short-haul”, the company said.

Jun Bei Liu of Ten Cap funds management said it’s “clearly a very challenging period for companies like Webjet.”

The travel agent was being squeezed by Virgin’s commission hit as well as its reliance on domestic travel, she noted.

“People are not flying as much (and) corporates are probably a little bit tighter in terms of spending,” she said.

Webjet, one of the pioneers of online travel agencies, has now seen its shares fall by more than 50 per cent this year on concerns for its outlook.

Shaw senior equities analyst Philip Pepe said Webjet was more exposed to price-conscious travellers than, for example, Flight Centre.

Its results were largely as expected, “but with a weaker-than-expected outlook,” he said. “It’s been 48 hours of negative news for a company that’s been challenged for the past year.”

Webjet has been at the centre of speculation both over its leadership and future ownership.

After less than two years in the role, Barry in March said that she would resign after announcing the full-year results.

Suitors, meanwhile, have circled the company as a takeover target. Corporate raider Gary Weiss’ investment company Ariadne Australia and private equity firm BGH Capital in February had teamed up to take control of Webjet, bidding against a rival takeover offer from Helloworld. Webjet knocked back both approaches, sending its shares diving.

Weiss was appointed to the board of Webjet at the start of May. Last week, it was announced he would become interim chairman, stoking speculation he could eventually mount another takeover bid.

The travel industry is dealing with disruption by new marketing technology and shifts in consumer preferences.

While Webjet pioneered the online travel agency model in Australia, it has risked being outmoded by larger competitors with more scale such as Flight Centre, or the airlines themselves as they’re marketing their flight and holiday deals.

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