The airline sector in Australia is technically a "duopoly" as two companies dominate the landscape – Qantas Airways Ltd (ASX: QAN) and Virgin.
According to a report from the ACCC, as of December 2024, Virgin has a 35% market share, Qantas 34.6%, and Jetstar 29%.
However, Jetstar is fully owned by Qantas Group as its low‑cost carrier brand.
Because these two airlines control over 70% of the domestic passenger market, it is called a duopoly.
Virgin recently announced a return to the ASX. What could this mean for well-established Qantas shares?
Image source: Getty Images
A quick recap
For background, Virgin Airlines went into voluntary administration in April 2020 amid the COVID‑19 pandemic.
As a result, it delisted later that year before it was acquired by US private equity firm Bain Capital.
Between 2020 and 2025, Bain restructured operations, slimmed the fleet, and shifted the focus to domestic traffic. Notably, it also sold a 25% stake to Qatar Airways in late 2024.
Last week, the company announced that it is set to return to the Australian share market with a $685 million initial public offering (IPO).
Shares will be offered at a fixed price of $2.90 per share, which, on a fully diluted basis, values the company at A$2.32 billion.
How does this impact Qantas shares?
It's safe to say Qantas has enjoyed the absence of a domestic rival over the last five years. The airline has risen 139.64% during that span.
While it's not time to run for the hills, Virgin's IPO could impact Qantas in several ways.
Virgin Australia remained operational throughout and after its voluntary administration, continuing to fly domestic and limited international services. However, this was at a reduced 'bare minimum' capacity.
Meanwhile, budget competitors REX and Bonza struggled to compete in the domestic airline industry during that span. If Virgin can re-establish itself as a major player in the market, Qantas could see earnings slide, driven lower by more competition.
Furthermore, Virgin's partnership with Qatar will boost international capacity (28 weekly Doha services initially), directly challenging Qantas' long-haul dominance.
Virgin is entering at a significantly lower valuation than Qantas. It is presenting itself as a cheaper entry to the airline sector.
This contrast may pressure investors to re-evaluate Qantas' premium valuation.
Essentially, if investors view Virgin as a credible and undervalued competitor – especially backed by Qatar Airways – appetite may shift.
Foolish Takeaway
It's important to note that Virgin Australia's ASX return raises a series of "what ifs".
From renewed competition and valuation pressure on Qantas to shifts in investor sentiment and pricing strategy. While the IPO marks a bold comeback, its full impact on the market remains speculative.
For example, when DigiCo Infrastructure REIT (ASX: DGT) opened late last year, it faced a rocky debut, dropping 9% on open, driven by investor concerns over a high valuation. It is now down 20.22% from its initial opening price of $5.00.
Whilst this example is in a different sector, it illustrates that a successful capital raise doesn't guarantee stock market success.
