Virgin Australia flags higher fuel costs, adjusts airfares on Mideast war impact (updated)

Virgin Australia Holdings

15/04/2026 02:43

Corrects to remove dated reference to Virgin adjusting airfare. The company announced those measures on March 20.

April 15 (Reuters) - Virgin Australia VGN.AX on Wednesday forecast higher fuel costs and said it has adjusted capacity for the second half, citing recent price volatility linked to the conflict in the Middle East.

The airline expects fuel costs, a major expense, to rise by about A$30 million to A$40 million ($21.38 million to $28.51 million) in the second half of fiscal 2026.

The revised forecast comes a day after the country's flag carrier Qantas Airways QAN.AX sharply raised its fuel cost outlook, citing higher and volatile jet fuel prices.

Here are some details:

Shares of the company rose as much as 12.3% to A$2.64, their highest level since March 19. Stock was last up 5.5%, while the broader S&P/ASX 200 benchmark index .AXJO was up 0.2%, as at 0105 GMT.

The company flagged that the price of jet fuel has been extremely volatile and has more than doubled since the end of February 2026, impacting fuel costs for the June 2026 quarter.

The carrier expects its 2026 full-year financial outlook to remain unchanged, with underlying earnings before interest and taxes (EBIT) and underlying EBIT margin to be higher in the second half compared to the prior year.

Revenue per available seat kilometre (RASK), a key measure of pricing power, is expected to grow by 5% in the second half, compared with its previous forecast of 3%-4%. The RASK growth for the fourth quarter is estimated to be 6%.

Total domestic capacity is now expected to increase by 1% in the second half and reduce by 1% in the fourth quarter.

Citi estimates the net movement in revenue is minimal, and revisions in profit largely to the lower end of the fuel guide.

Virgin Australia expects minimal impact from the cancellation of its services to Doha until mid-June due to the wet lease arrangement it has with its operational partner Qatar Airways.

For the remainder of the second half of fiscal 2026, Virgin Australia has hedged 92% for Brent crude oil and 71% for refining margins.

For the full year, only the unhedged portion of Brent crude oil and refining margins will be exposed to the volatility from the Iran conflict.

The group has also hedged 93% for Brent crude oil and 15% for refining margins for the first half of fiscal 2027.

Citi noted that with fuel hedging reduced to 15% in the first half of fiscal year 2027, the extent to which higher fuel costs could weigh on fiscal 2027 earnings remains a key concern.

($1 = 1.4031 Australian dollars)

 (Reporting by Sherin Sunny in Bengaluru; Editing by Vijay Kishore and Sherry Jacob-Phillips)

 ((Sherin.Sunny@thomsonreuters.com;))