Qantas has a higher valuation than Virgin Australia, but I think its brands, loyalty business, and dividend outlook give it the edge.

Qantas Airways Ltd and Virgin Australia Holdings Ltd shares give investors two different ways to invest in Australian aviation. 

I think both are worth watching, but my preference is clear.

I would buy Qantas shares by far.

Virgin has some appeal on valuation, but I think Qantas has the stronger business, broader earnings base, better dividend outlook, and more attractive long-term investment case.

Virgin Australia shares look cheap

Virgin Australia is the cheaper of the two airline stocks on headline earnings multiples.

According to CommSec, consensus estimates point to earnings per share of 50 cents in FY26, 46.9 cents in FY27, and 54.4 cents in FY28.

Based on a share price of $2.64, that puts Virgin on around 5 times FY26 earnings, 6 times FY27 earnings, and less than 5 times FY28 earnings. 

That looks inexpensive.

Virgin also has a clearer position than it had in the past. The business is now more focused, and its role in the Australian market appears more disciplined. It has a well-known brand, exposure to domestic travel, and the potential to benefit if demand remains solid.

However, I do not think the low valuation is enough to make it my preferred pick.

Airline earnings can move quickly when fuel prices rise, competition increases, or demand weakens. A low price-to-earnings (P/E) ratio can look attractive, but it needs to be weighed against the quality and resilience of the earnings.

The dividend outlook is also modest. CommSec estimates dividends per share of 5 cents in FY26 and 4.5 cents in FY27, implying dividend yields of around 1.9% and 1.7%.

Virgin Australia may do well from here, but I think there is a better airline stock to buy.

Why I prefer Qantas shares

Qantas trades on a higher valuation, but I think it deserves to.

CommSec estimates point to earnings per share of 98.4 cents in FY26, $1.16 in FY27, and $1.15 in FY28.

Based on a share price of $9.21, that puts Qantas on around 9 times FY26 earnings and around 8 times FY27 and FY28 earnings.

That is more expensive than Virgin, but I do not think it looks stretched for a business with Qantas’ advantages.

The dividend outlook is also much stronger. CommSec forecasts dividends per share of 39.6 cents in FY26, 44.8 cents in FY27, and 56.2 cents in FY28. That implies forward yields of around 4.3%, 4.9%, and 6.1%.

I would not treat an airline as a defensive dividend share. But if those forecasts are achieved, the income stream could become a meaningful part of the total return.

What I like most about Qantas is the quality of the overall business.

It has the premium Qantas brand, Jetstar for value-focused travel, a strong domestic position, international exposure, and a loyalty business that adds another layer to the investment case.

That loyalty business is a major difference in my view. Frequent Flyer points, partners, financial products, retail offers, and customer engagement give Qantas ways to earn from its customer base beyond simply selling seats on planes.

Qantas also has more strategic flexibility. Fleet renewal, network adjustments, premium travel, low-cost travel, loyalty, and capital management all give the group several levers to pull over time.

Foolish Takeaway

Virgin Australia may appeal to value-focused investors, but Qantas is the clear winner for me.

I think its higher valuation is justified by the quality of the business, the strength of its brands, and the broader ways it can generate earnings over time.

The share price will still be volatile at times. That comes with the airline sector. But for investors looking for the ASX airline stock to buy and hold, I think Qantas is comfortably the better choice.

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Credits: Qantas

The post Qantas shares vs Virgin Australia shares first appeared on AircrewNews.com.

Australia’s second-largest airline has revealed its March price hikes following Qantas in cutting travel capacity and raising airfares amid the conflict in the Middle East.

But Virgin Australia is more confident about the effectiveness of its fuel hedging, even though it is currently facing an increased cost of $30-40 million in the second half of its financial year.

Qantas on Tuesday revealed its second-half fuel bill would rise by $800 million to $3.3 billion.

Virgin Australia also said fare increases and capacity cuts would help protect earnings and left its profit outlook unchanged.

The carrier, which will report its fiscal 2026 results in August, still expects second-half underlying earnings to be higher than the previous corresponding half, when it reported annual earnings of $664.4 million.

“In FY26, the group continues to experience strong customer demand, with higher fuel costs largely mitigated through effective fuel hedging and recent airfare and capacity adjustments,” Virgin told the stock exchange on Wednesday.

For the rest of its fiscal year, Virgin is hedged 92 per cent for Brent crude oil and 71 per cent for refining margins.

This means its exposure is limited to the unhedged portion of crude and refining margins.

In contrast, Qantas said it had hedged 90 per cent of its exposure to crude oil costs but remained exposed to the cost of refining crude into jet fuel.

Refining costs have soared from around $US20 a barrel in February, when the conflict began, to a peak of around $US120.

Like all airlines, fuel is one of Virgin’s highest costs.

In the first half, fuel accounted for 21 per cent of total operating expenses with the equivalent of 3.4 million barrels of oil consumed at a cost of about $555 million.

“To offset the impact from increased fuel and other operating costs, such as airport charges, Virgin Australia has adjusted airfares and capacity” in the current half.

Domestic capacity will fall by 1 per cent in the June quarter, but will still be 1 per cent higher across the half.

At the same time, revenue per available seat kilometre – a key metric that reflects how much money is generated for each seat – will rise by 5 per cent across the second half, and 6 per cent in the June quarter.

Looking ahead to the new financial year, Virgin said ongoing volatility meant its capacity setting would continue to be under review.

“The group continues to monitor the external environment and retains flexibility to take further actions if required,” it added.

Credits: Virgin Australia

The post Virgin reveals raised fares, cuts capacity as fuel prices soar first appeared on AircrewNews.com.