Virgin Australia flags higher fuel costs amid the Mideast conflict

Virgin Australia Holdings

15/04/2026 24:42

Corrects to remove dated reference to Virgin adjusting airfare in paragraph 1. The company announced those measures on March 20.

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

The airline expects an increase in fuel costs, one of its largest expenses, of around A$30 million to A$40 million ($21.38 million to $28.51 million) for the second half of fiscal 2026.

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

Here are some details:

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 airline 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 to 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.

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.

($1 = 1.4031 Australian dollars)

 (Reporting by Sherin Sunny in Bengaluru; Editing by Vijay Kishore)

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