Virgin Australia boosted by new planes, fuel strategy

Virgin has posted a sharp rise in profits, helped by newer planes coming into the fleet, effective fuel hedging, and an internal transformation program.

The airline took delivery of 17 planes in the fiscal year, including 13 Boeing 787-8 Max’s with engines that burn less fuel. The airline, flying 108 narrow body planes, is seeing the benefit of a refreshed fleet.

Underlying pre-tax earnings rose to $753 million in fiscal year 2025 from $664.4 million the previous year, the company said. Statutory profit rose 4.7 per cent to $501 million. Virgin will pay a dividend of 7.6¢ a share.

“Our strategy is working. We have built a simpler, more focused business with a primarily domestic
network, targeted short-haul international services and global connectivity through our airline
partners,” said CEO Dave Emerson.

By hedging refining margins as well as crude, Virgin contained its extra fuel cost in the year. Qantas, which flies a larger fleet, yesterday noted that fuel price rises related to the conflict added $610 million in costs for that airline.

“We delivered strong earnings growth and further margin expansion despite significant inflationary pressure across the aviation supply chain and a more challenging operating environment,” said Emerson said.

While the aviation industry has faced a fuel price shock triggered by the conflict in the Middle East, Virgin hedged both crude oil and the more volatile jet fuel refining margins, which limited its exposure to the cost compared to Qantas.

Vantage Markets senior market analyst Hebe Chen said that Virgin’s result “ticks almost every box investors wanted to see, with disciplined capacity, effective hedging and tighter cost control helping preserve profit resilience through a much bumpier macro backdrop.”

“Another bonus piece falling into place is Virgin’s fleet refresh, with newer aircraft helping lower fuel burn and sharpen operating efficiency at a time when every dollar of airline cost matters.“

Virgin said its result was helped by more than $450 million in gross Transformation Program benefits during the fiscal year, which includes the renewal of the airline’s fleet.

Virgin’s transformation program is comprised halfway of revenue optimisation, increasing direct sales and business to business sales growth. About 40 per cent of involves seat densification, fleet renewal and integrated planning, as well as improved fuel efficiency.

Data personalisation of the Velocity program contributes 10 per cent to the overall transformation program.

Nevertheless, rising costs and demand moderated by the cost of living jump saw Virgin cut back a limited number of routes during the fiscal year.

More to come

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.