Background: Virgin Australia is the country's second-biggest airline after Qantas, founded here in 2000 and employing around 8,000 people across Australia. But the airline has had a bumpy year, with fuel prices surging amid conflict in the Middle East. This caused Virgin to hike domestic airfares by 5% in March and also suspend some domestic routes.

What happened: Despite the turbulence, Virgin's earnings before interest and tax climbed 13.4% to $753 million in FY26, allowing it to pay shareholders a dividend for the first time since returning to the ASX. But this didn't mean fare hikes are over...

Late last week, Virgin told travel agents it would raise prices again as fuel costs surged. And the airline already told investors in August that more fare increases were coming.

What else: Virgin's fuel-hedging safety net, which helped protect its margins from oil price swings, is wearing thin. When that protection fades, fuel price shocks become a much bigger problem to absorb.

What's the key learning?

💡 Fuel hedging helps airlines lock in fuel prices ahead of time. Virgin Australia uses agreements to secure fuel prices months in advance, protecting it from sudden oil price spikes.  

💡 Part of Virgin's fuel-price protection has run out just as costs surge once again. Jet fuel prices rose by 40% between February and June this year. So, expiring fuel hedging agreements leave the airline more exposed to current fuel prices.    

💡 Fuel hedging can soften sudden price shocks for a while, but it only buys Virgin time. When those agreements run out, airlines eventually have to pass rising costs on to customers. Virgin needs to keep its earnings steady to keep investors happy.