Virgin Australia has announced plans to reduce domestic flight capacity and increase fares as it grapples with a sharp rise in jet fuel costs.

In an update to the Australian Securities Exchange, the airline said fuel expenses for the second half of 2026 are expected to be up to AUD 40 million higher than previously forecast, largely due to surging oil prices linked to ongoing tensions in the Middle East.

The carrier noted that jet fuel prices have been highly volatile, more than doubling since late February, prompting it to take measures to manage costs. These include expanding fuel hedging in the short term and adjusting both fares and flight capacity.

Virgin Australia said its total domestic capacity would be reduced by around 1 per cent in the current June quarter as part of these efforts.

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The move follows a similar warning from the Qantas Group, which recently indicated that higher fuel costs could significantly impact its finances and confirmed it had already cut domestic capacity.

The developments come against a backdrop of broader global concerns over energy supply disruptions, as geopolitical tensions continue to influence oil markets.

Separately, Lawrence Wong and Anthony Albanese recently reaffirmed commitments to strengthen cooperation on energy security, highlighting the importance of maintaining stable supplies of petroleum products and liquefied natural gas during periods of uncertainty.

Both governments also stressed the need to ensure the smooth flow of essential goods and to uphold a rules-based global trading system amid ongoing volatility in energy markets.

With IANS inputs