Virgin Australia maintains guidance despite rising fuel volatility

Virgin Australia (ASX:VGN) issued a market update for April, signalling a steady course despite significant turbulence in global energy markets.

The airline reported that while fuel price volatility—spurred by escalating geopolitical events in the Middle East—has seen jet fuel costs more than double since February, its financial guidance for the 2026 fiscal year remains unchanged.

Management expects underlying EBIT and margins for the second half of the year to surpass those recorded in the same period for 2025.

The group’s ability to weather these external shocks is largely attributed to a robust fuel hedging programme and strategic operational adjustments.

For the remainder of the 2026 financial year, Virgin Australia has secured 92% of its Brent crude oil requirements and 71% of its refining margins through hedging.

Despite these protections, the unhedged portion is anticipated to drive an incremental fuel cost increase of approximately $30 million to $40 million.

To mitigate the expenses and rising airport charges, the carrier has already implemented tactical adjustments to airfares and flight capacity.

Virgin Australia's balance sheet remains a point of strength, maintaining a leverage ratio of 0.8x net debt to underlying EBITDA—well below its 1x to 2x target range—and bolstered by a liquidity cushion of $1.5 billion.

While fuel security remains a critical concern for the broader aviation sector, the airline confirmed its suppliers have provided assurances regarding stable fuel stocks through May, ensuring continued operational stability for the travelling public.