Virgin Australia has raised fares and trimmed domestic capacity in response to surging jet fuel costs, but says its full-year financial guidance remains intact – with revenue per seat expected to grow at roughly double the rate it had previously forecast.
The airline is now forecasting RASK growth of around 5 per cent for the second half of FY26 – up from earlier guidance of 3-4 per cent – rising to 6 per cent in the final quarter. Domestic capacity growth has been wound back to 1 per cent for the half, with a 1 per cent reduction in Q4. The airline’s Doha services, operated under a wet lease with Qatar Airways, remain suspended until at least mid-June.
The capacity and fare moves come in response to jet fuel prices more than doubling since late February. Virgin is hedged at 92 per cent for Brent crude oil and 71 per cent for refining margins for the remainder of the half, but the unhedged portion is expected to add $30-40 million in fuel costs compared to prior forecasts. Despite that, the carrier maintained its guidance that underlying EBIT and margin for the second half will come in ahead of the same period last year. Virgin is carrying $1.5 billion in liquidity with net debt at 0.8 times underlying EBITDA – below its own target range.
Aviation analyst Robyn Ironside told Travel Weekly yesterday that the airline’s Qatar relationship has weighed on its share price more than the fuel costs alone, given the suspension of Doha services. Virgin said the wet lease structure limits its financial exposure, describing the suspension as not material to earnings.
‘They don’t like to go backwards’: Qantas stays in the green amid fuel crisis, says Robyn Ironside
Virgin’s update follows a similar move by Qantas on Tuesday, which flagged an $800 million fuel bill blowout and a $400-500 million hit to full-year profits. Both carriers have secured fuel supply assurances into May, though the outlook beyond that remains uncertain – particularly if shipping through the Strait of Hormuz, through which around 20 per cent of global oil supply passes, remains disrupted.
For travel advisors, the immediate priorities are managing client expectations around fare increases and schedule changes, particularly on domestic routes where capacity is being pulled back at short notice. The redeployment of Qantas capacity to European routes presents opportunity for advisors managing clients affected by Middle East disruptions. Regional operators remain among the most exposed, with high fuel costs threatening to deter the discretionary travellers their businesses depend on.
Both airlines have flagged that FY27 planning remains under review. Virgin Australia’s refining margin hedging for the first half of next year sits at just 15 per cent – a reminder that the industry’s fuel exposure is far from resolved.
