Virgin Australia FY26 Earnings Preview

Research evidence excerpt

J P M O R G A N

Asia Pacific Equity Research

06 August 2026

Virgin Australia

Neutral

VGN.AX, VGN AU

Price (05 Aug 26):A$2.95

FY26 Earnings Preview

▲Price Target (May-27):A$3.00

Prior (May-27):A$2.85

We maintain our Neutral recommendation on VGN ahead of its FY26 results. Our

August price target, based on an average of DCF and P/E relative valuations, rises

to $3.00 (was $2.85), though we remain cautious heading into FY27, noting fuel

price uncertainty. Longer term, we continue to expect 1) medium-term yield

growth, underpinned by an under-supplied and structurally protected domestic

market, and 2) margin protection further supported by the company’s

Transformation Program; which we expect to continue over the medium term.

Guidance: On April 15, the company increased fuel forecasts for 2H26 by A$30–

40m (prior guidance only provided hedging percentage estimates). Ultimately,

2H26 fuel is largely hedged for Brent and for refining, and we model fuel costs of

$1.1b for 2H26, in line with Bloomberg consensus. Our ASK and RASK are also

broadly in line with guidance. Our PBT falls slightly to $562m, up 14% on the PCP

and our EPS to 50.3cps, in line with Bloomberg consensus.

Key areas of focus for the FY26 results:

Fuel commentary and expectations: We expect fuel price volatility to remain

elevated, particularly through 1H27, as geopolitical dynamics influence both

Brent crude prices and crack spreads. With refining margins ~15% hedged in

1H27 (QAN unhedged), the company has limited protection against adverse

moves in refining margins. In contrast, Brent exposure is more meaningfully

hedged, ~70% hedged in 1H27 and approximately 40% in 2H27, broadly

similar to QAN.

Domestic market performance and costs: Performance on key domestic

leisure and corporate routes remains a focal point, particularly if fuel prices

stay elevated amid a softer macroeconomic backdrop. Any commentary on a

potential VietJet entry into the domestic market could also influence sentiment.

Regardless, we expect management to steer the discussion toward its

transformation program, where it has greater control. As Jetstar moves to

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