Virgin Australia has followed in the footsteps of Qantas by reducing flights and increasing ticket prices in response to surging fuel costs impacting Australian airlines.

In a recent market update, Virgin Australia revealed that it anticipates a fuel expense exceeding initial forecasts by $30 million to $40 million for the latter half of the 2025-2026 fiscal year.

To adapt to these rising costs, Virgin will decrease its domestic flight capacity by 1% in the quarter leading up to June 30. Additionally, the airline now targets a revenue increase per seat of 5%, up from the previous goal of 3% to 4%.

“The price of jet fuel has been extremely volatile and has more than doubled since the end of February 2026, significantly affecting fuel costs for the June 2026 quarter,” Virgin Australia informed its investors.

The airline further explained that its strategy involves short-term hedging to counteract price fluctuations, alongside other operational measures such as adjusting fares and capacity as necessary.

Meanwhile, Qantas recently announced a 5% reduction in its domestic flight capacity. The airline expects to incur jet fuel costs between $3.1 billion and $3.3 billion for the second half of the fiscal year, as refinery prices have soared from $20 to $120 per barrel.

The hike in jet fuel is expected to deliver between a $500 million and $800 million hit to the airline’s bottom line.

Qantas Group says it is working closely with the government and jet fuel suppliers who remain confident about supply for the remainder of April and well into May.

“We are closely monitoring the situation given the ongoing uncertainty in global fuel supply chains,” the update said.

“The group has taken action to mitigate the impact of the conflict in the Middle East, including international network changes, capacity adjustments and fare increases.”

Australian airlines ‘most at risk’

Morningstar DBRS released its report just before the US and Iran reached a two-week ceasefire agreement, which included a pledge by Iran to reopen the Strait of Hormuz during the halt in fighting.

Since the war began on February 28, jet fuel prices have nearly doubled, with airlines passing the cost on through ticket increases.

Analysts say carriers with aggressive fuel hedging — a risk management strategy to lock in prices — should be better protected in the near term.But if global supplies of aviation fuel run low, other airlines will be exposed. 

“Beyond price pressures, a prolonged supply chain disruption in the Middle East —combined with export restrictions by key jet fuel suppliers such as China — raises the risk of physical jet fuel shortages in certain regions,” the report says.

“In such a scenario, airlines with greater reliance on imports from affected regions are likely to be most exposed, including carriers in Australia, Asia, and some European markets.”

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