Virgin Australia is adjusting domestic economy and business fares for bookings made from 24 March after reporting that its jet fuel spot price has recently surged to around twice what it was just a month earlier. The airline, which counts fuel and airport charges among its largest expenses, is dealing with a broader cost base rising faster than general inflation while demand for flights remains strong despite ongoing conflict and instability in the Middle East.
In this environment, Virgin Australia is trying to walk a tightrope, as it wants to keep flying at scale and stay competitive on price but it also needs to respond to what it describes as a volatile operating landscape and significant inflationary pressure across its supply chain. The carrier is watching seat capacity but has not yet committed to cutting flights, and its move follows earlier fare increases of about 5% on international routes by a key rival that is now reviewing ticket prices roughly every two weeks and closely managing costs across its network. Other major global airlines, including operators based in New Zealand, Europe and Asia have also raised fares in recent weeks as they navigate higher fuel bills and disrupted routes.
What is striking is that travellers still seem keen to fly even as prices climb and some routes through the Middle East become less reliable. Aviation analytics data indicates that bookings between Australia and Europe for April are up around 24% year on year with nearly a 49% jump in tickets for routes that avoid the Middle East since the latest conflict escalated in late February. Much of that growth appears to come from customers of Gulf-based airlines shifting to carriers that route via Asia or North America while large travel agencies report corporate clients rerouting trips rather than cancelling them. At the same time, millions of passengers have been affected by schedule cuts in and out of the region, airlines are extending refund and free rebooking options into April, and both major Australian-listed carriers have seen their share prices fall, one by about 16% and the other by roughly 22%, which highlights how fragile airline finances can be when geopolitics, fuel markets and passenger sentiment collide.
