Webjet Group Ltd (ASX: WJL) shares are being smashed on Wednesday after investors were hit with another difficult update.
At the time of writing, the Webjet share price is down 15.31% to 41.5 cents.
This adds to what has already been a brutal year for shareholders. The ASX travel stock is now down 28% over the past month and 52% since the start of the year.
The fall comes after Webjet updated investors on its commercial arrangements with Virgin Australia Holdings Ltd (ASX: VGN).
It also released its FY26 results, which showed a business still dealing with softer trading conditions, higher investment, and pressure on margins.
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Virgin revenue hit
The main issue today is Webjet's update on its agreement with Virgin Australia.
Webjet said its Webjet Marketing subsidiary has been receiving commission payments from Virgin Australia Airlines and Virgin Australia International Airlines.
These payments relate to the sale of Virgin flights and ancillaries, along with specified performance targets.
Virgin has now told Webjet it will substantially reduce its commission streams and commercial arrangements from 1 July 2026.
Webjet said the change would have had a financial impact of around $3 million on FY26 revenue if it had applied from the start of the year.
While the amount isn't huge, investors are unlikely to welcome another revenue hit when the business is already facing a tougher FY27.
Webjet is already dealing with softer demand in parts of its online travel agency business, higher airfare pressure, and weak consumer confidence.
Losing revenue from a major airline partner would add another headwind going into FY27.
Profit falls despite higher revenue
Webjet's FY26 result had some positives, but investors appear to be focused on the weaker parts.
Revenue rose 1% to $136.4 million, while statutory net profit after tax (NPAT) increased 85% to $3.7 million.
However, underlying EBITDA fell 20% to $28.1 million, and underlying NPAT dropped 24% to $13.6 million.
Bookings fell 7% to 1.4 million, while total transaction value declined 3% to $1.46 billion.
The Webjet OTA business remained the biggest earnings contributor, with EBITDA of $38.7 million. But even there, bookings were down 9%, and EBITDA fell 18%.
The Cars and Motorhomes division held up better, lifting EBITDA to $4.3 million from $1.6 million.
Webjet also declared a final fully-franked dividend of 2 cents per share.
This takes FY26 dividends to 4 cents per share, which was above 100% of underlying NPAT.
A tough year ahead
Webjet said FY27 trading is expected to be materially affected by lower airline commissions, RBA surcharging regulation changes, and lower variable revenue items.
It also said operating conditions remain fluid and challenging, with geopolitical conflict, inflationary pressure, and low consumer sentiment weighing on demand.
Management pointed to cost control, automation, AI, capital discipline, and balance sheet strength as key priorities.
The balance sheet is still in decent shape, with $93.9 million in net cash and no borrowings at 31 March.
