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Virgin Australia’s FY26 update: Hedging cushions rising fuel costs

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The Virgin Australia Holdings Ltd (ASX: VGN) share price is in focus after the airline confirmed its FY26 financial guidance remains unchanged, with underlying EBIT and EBIT margin expected to improve in 2HFY26 despite a surge in fuel prices.

What did Virgin Australia report?

  • FY26 financial guidance unchanged; 2HFY26 underlying EBIT and EBIT margin both expected to be higher than 2HFY25
  • Group leverage at 0.8x net debt/underlying EBITDA, below its 1–2x target range
  • Liquidity position of $1.5 billion at 31 March 2026
  • Fuel costs of $554.7 million for 1HFY26, representing 21% of total operating expenses
  • 2HFY26 RASK (revenue per available seat kilometre) growth expected at approximately 5%, up from prior 3–4% guidance

What else do investors need to know?

Virgin Australia has responded to fuel price volatility by adjusting fares and domestic capacity, with 2HFY26 capacity now expected to rise 1% but fall 1% in the fourth quarter. Strong fuel hedging means the group is protected from most rises, with 92% of Brent crude and 71% of refining margin exposure hedged for the remainder of FY26.

Although jet fuel prices have more than doubled since late February, Virgin Australia expects the increase in fuel costs for 2HFY26 to be about $30–40 million above earlier forecasts. The airline reports continued supply assurance from its fuel suppliers for operations into May.

What’s next for Virgin Australia?

Virgin Australia says its outlook for FY26 remains solid, assuming no major changes to demand, jet fuel prices, or fuel supply in the near term. For early FY27, the company has continued strong hedging (93% of Brent crude but only 15% of refining margin), and reviews are underway to adjust capacity if volatility persists. The business remains confident in its flexible cost and hedging strategies to navigate uncertainty.

Virgin Australia share price snapshot

Over the past 12 months, Virgin Australia shares have declined 27%, trailing the S&P/ASX 200 Index (ASX: XJO) which has risen 15% over the same period.

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The post Virgin Australia’s FY26 update: Hedging cushions rising fuel costs appeared first on The Motley Fool Australia.

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Motley Fool contributor Laura Stewart has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips. This article was prepared with the assistance of Large Language Model (LLM) tools for the initial summary of the company announcement. Any content assisted by AI is subject to our robust human-in-the-loop quality control framework, involving thorough review, substantial editing, and fact-checking by our experienced writers and editors holding appropriate credentials. The Motley Fool Australia stands behind the work of our editorial team and takes ultimate responsibility for the content published by The Motley Fool Australia.

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