From February 2027, lower-cost carrier Jetstar, which is owned by Qantas, will charge extra fees of $25 or more for carry-on bags weighing more than 7kg on domestic and short-haul international flights.
Airlines call this ancillary revenue, which is generated from luggage and change fees, in-flight food and beverages, lounge access, in-flight Wi-Fi and third-party sales of insurance and other products.
Virgin Australia chief commercial officer Paul Jones said ancillary revenue was an important pillar of the airline's overall business model, and it's growing.
But there's no movement yet on overhead space fees.
"Effectively, the changes that were announced in the market around baggage - and that is a significant change - we don't at this point plan a change to our baggage policies," he told an earnings call.
Virgin, which re-listed on the stock exchange in June 2025, on Friday reported its first full-year profit as a full company member of the local bourse.
While its first half 2025/26 performance was strong, conditions were more challenging in the second half due to cost pressures and the US-Iran war, which made fuel markets volatile.
But Virgin managed to offset most of that due to judicious fuel hedging, leaving its total fuel costs flat for the year at $1.1 billion.
"The outcome on fuel costs demonstrates the effectiveness of our hedging program, which protected the business from significant increases in oil and refining margin prices in the second half," chief financial officer Race Strauss added.
Virgin made a bottom-line net profit of $501.2 million for 2025/26, up 4.7 per cent from the previous financial year.
Its underlying earnings - before interest and tax - came to $753.2 million, a jump of 13.4 per cent for the 12 months ended June 30, on an underlying revenue and income lift of 8.1 per cent to $6.3 billion.
Virgin also declared a dividend of 7.6 cents - its first payout to shareholders since relisting. Future dividend payments will depend on available surplus capital and will be decided each time it reports its results.
RBC Capital Markets analyst Owen Birrell said Virgin's results were positive, given the better-than-expected underlying result and the dividend payout.
"Virgin has delivered a solid financial year 2026 result," he said.
Looking ahead, chief executive Dave Emerson said demand and forward bookings remain strong as consumers continue to prioritise leisure travel in a world of higher living costs.
At the same time, Virgin plans to cut domestic capacity by around three per cent in the first half of 2026/27, against the same period in the previous year.
However, its revenue per available seat kilometre is forecast to rise by six to eight per cent, supported by strong demand.
Virgin's first-half fuel bill is estimated at $700 million, with hedging of 96 per cent for Brent crude oil and 20 per cent for refining margins.
Based on that, its first-half underlying earnings are likely to be broadly in line with the same six months in 2025/26, implying a result around $490 million.
Virgin does face ongoing cost pressures for labour and airport and related fees, alongside its rivals.
In 2025/26, it absorbed an 8.3 per cent jump in its wages bill to $1.4 billion and a 15.4 per cent spike in airport fees to $1.3 billion.
In early afternoon trading, Virgin shares were down three per cent to $2.72.
The airline, which services 56 domestic and 16 short-haul international routes, carried 21.3 million passengers in the year, up 3.2 per cent.
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