The Virgin Australia Holdings Ltd (ASX: VGN) share price is in focus today after the airline announced a market update.
Virgin is one of the largest Australian airlines with a domestic network, as well as short-haul international services, charter and cargo operations, and a loyalty program called Velocity Frequent Flyer.
Fuel
The airline provided an update on its fuel, given the significant volatility amid the Middle East events.
Virgin Australia noted that fuel is one of the largest costs, with its fuel expense being $554.7 million in the first half of FY26, representing 21% of total operating expenses with the equivalent of 3.4 million barrels of oil consumed.
It noted the price of jet fuel has more than doubled since the end of February 2026, which impacts fuel costs for the June 2026 quarter.
The airline said its policy is to operate hedging with higher volumes in the short-term to mitigate this price volatility, with other operational levers, including fare and capacity adjustments, being available over time.
For the rest of FY26, the ASX share said 92% of Brent crude oil and 71% of refining margins are hedged. The unhedged portion is expected to increase fuel costs in the second half by between $30 million to $40 million compared to previous expectations.
Virgin Australia said its fuel suppliers continue to provide assurances regarding near-term supply of aviation fuel to support operations “well into May 2026”.
For the first half of FY27, the company is 93% hedged for Brent crude oil and 15% for refining margins.
Capacity and airfares
The airline said that it continues to experience strong customer demand with higher fuel costs. To offset the impact of higher costs, it has adjusted airfares and capacity.
Revenue per available seat kilometre (RASK) growth is now expected to be approximately 5% in the second half of FY26 and 6% in the fourth quarter, compared to previous guidance of between 3% to 4% for the FY26 second half.
Total domestic capacity is expected to increase by 1% in the second half, but reduce by 1% in the fourth quarter.
Virgin Australia services to Doha operated through the wet lease arrangement with partner Qatar Airways are currently cancelled until mid-June. The wet lease arrangement “minimises the risk to Virgin Australia’s balance sheet and earnings, therefore is not financially material”.
Final thoughts on the Virgin Australia share price
Unless the situation quickly changes, it seems higher fuel costs (and inflation) will stick around into FY27.
Will Virgin Australia be able to pass on its increased costs? I imagine shareholders are counting on it to ensure profitability isn’t eroded.
I don’t think Virgin Australia is the best business to buy today. There are other ASX growth shares that could be better opportunities amid the volatility.
