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

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The aircraft emerged from Boeing’s Seattle factory with a throwback design that recalls the 2000-2011 era, when the carrier operated under its original name before rebranding to Virgin Australia.

Named Lake Centenary, following the airline’s tradition of naming planes after bodies of water, the jet marks two milestones: it’s Virgin Australia’s 150th Boeing 737 since the airline launched in 2000, and the 100th 737 in its current fleet.

The aircraft, registered VH-8VI, is one of 12 737-8s the airline expects to receive this year. Four Embraer E190-E2 jets are also on the way for Virgin Australia Regional Airlines as part of a broader fleet renewal push.

“Virgin Australia is in the strongest position it has been in over the past 25 years, and we are using that momentum to keep investing in our future,” said CEO Dave Emerson. “The Boeing 737-8 is central to our fleet renewal and growth program, which is one of the most important investments we are making in the company.”

The B737-8 burns about 19% less fuel and produces 50% less noise than the older B737-800 it replaces. Emerson noted that a more efficient fleet helps the airline manage costs and remains its most effective tool for cutting emissions in the near term. He also pointed to improved reliability, saying Virgin Australia has consistently posted the lowest cancellation rate among major Australian carriers.

Virgin Blue began flying between Brisbane and Sydney in August 2000 with just two Boeing 737-400s. Last year, more than 21 million passengers flew with Virgin Australia, the highest figure in the airline’s history.

The retro-liveried aircraft is currently undergoing final preparations, including test flights, before being ferried to Brisbane in April 2026. It will then enter service on domestic and short-haul international routes.

Credits: Virgin Australia

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