Webjet Shares Hit New Low, Down 50% This Year as Virgin Australia Cuts Commissions

Webjet shares (ASX:WJL) crashed to fresh 52-week lows on Wednesday after the online travel agency revealed Virgin Australia will substantially reduce commission payments from July, compounding a 24% drop in underlying profit and triggering fresh concerns about the sustainability of its commission-driven business model.

The Webjet share price rounded out the day 11.22% lower at A$0.44, touching an intraday low of A$0.40 before recovering modestly into the close. The stock now sits 50% lower year-to-date, marking one of the worst performances on the ASX in 2026.

Virgin Australia Commission Cuts Hit Revenue Outlook

The primary catalyst for Wednesday’s decline was Webjet’s disclosure that Virgin Australia Airlines and Virgin Australia International Airlines will substantially reduce commission streams and commercial arrangements from 1 July 2026. Webjet’s marketing subsidiary currently receives commission payments for the sale of Virgin flights and ancillaries, along with performance-based payments tied to specified targets.

Webjet quantified the financial impact, stating that if the commission changes had been in place from 1 January 2026, full-year FY26 revenue would have been approximately A$3 million lower. While the absolute dollar figure represents a relatively modest percentage of group revenue, the timing compounds an already deteriorating outlook for FY27 and raises questions about whether other airline partners may follow Virgin’s lead in renegotiating distribution economics.

The commission reduction comes as Virgin Australia re-enters the holiday packages market under its own brand, reducing reliance on third-party intermediaries like Webjet. This strategic shift by Virgin reflects a broader industry trend where airlines with strengthened balance sheets and improved profitability are reasserting control over distribution channels and seeking to capture more of the value chain directly.

Margin Squeezed Despite Revenue Growth

Webjet’s full-year FY26 results, released alongside the Virgin Australia update, showed revenue rising 1% to A$136.4 million but underlying earnings before interest, tax, depreciation and amortisation falling 20% to A$28.1 million. Underlying net profit after tax declined 24% to A$13.6 million, while statutory NPAT increased 85% to A$3.7 million, aided by non-operating items and tax adjustments.

The headline revenue growth masked significant volume weakness, with total bookings falling 7% to 1.4 million and total transaction value declining 3% to A$1.46 billion. The deterioration was most pronounced in Webjet’s core OTA business, which remained the largest earnings contributor with EBITDA of A$38.7 million but saw bookings drop 9% and EBITDA fall 18% year-on-year.

A rare bright spot emerged in the Cars and Motorhomes division, which lifted EBITDA to A$4.3 million from A$1.6 million in the prior year, suggesting some success in product diversification and cross-selling initiatives. However, the improvement in this smaller segment was insufficient to offset the margin compression in the core OTA business.

Webjet declared a final fully-franked dividend of 2 cents per share, bringing total FY26 dividends to 4 cents per share. The payout represents more than 100% of underlying net profit after tax, well above typical payout ratios and consistent with management’s stated intention to distribute franking credits to shareholders while maintaining balance sheet flexibility.

Outlook Compounds Concerns

Management issued cautious guidance for FY27, stating that trading is expected to be materially affected by lower airline commissions, Reserve Bank of Australia surcharging regulation changes, and lower variable revenue items. The company emphasised that operating conditions remain fluid and challenging, citing geopolitical conflicts, inflationary pressure, and weak consumer sentiment as headwinds weighing on discretionary travel demand.

The outlook commentary provided no quantitative guidance or offsetting positive catalysts, reinforcing market perceptions that FY27 will mark another difficult year for the business. The confluence of lower commissions, regulatory changes affecting payment processing economics, and soft consumer demand creates a multi-faceted challenge with few obvious near-term solutions.

Webjet’s cautious stance contrasts with the more optimistic tone struck in November 2025 when the company reported first-half FY26 results described as “resilient” despite a 9% decline in underlying EBITDA. The deterioration in second-half trading and the Virgin Australia announcement suggest conditions worsened materially in the back half of the financial year, undermining confidence in management’s ability to forecast the operating environment.

Wider Headwinds

The commission reduction by Virgin Australia reflects broader structural pressures facing online travel agencies as the industry moves beyond the post-pandemic recovery phase. Elevated domestic airfares in Australia, driven partly by reduced competition following the exit of carriers like Rex and Bonza, have suppressed leisure travel demand among price-sensitive consumers who form the core of Webjet’s customer base.

Simultaneously, airlines with improved profitability and stronger balance sheets are reassessing distribution strategies and seeking to reduce reliance on third-party intermediaries. Virgin’s move to launch its own holiday packages directly competes with Webjet’s core offering and signals a potential industry-wide shift toward disintermediation.

The regulatory environment is also evolving, with new Reserve Bank of Australia rules around card surcharging and merchant fees potentially pressuring OTA economics if platforms cannot fully pass costs through to consumers. These regulatory changes add another layer of complexity to an already challenging revenue outlook.

Markets are also weighing broader macroeconomic factors, including persistent cost-of-living pressures and weak consumer confidence that continue to dampen discretionary spending on travel. Multiple industry commentators have noted that the combination of high domestic airfares and constrained household budgets is creating a particularly difficult environment for volume-driven leisure travel businesses.