Qantas has revised its fuel cost projections, now estimating expenses could soar to approximately $3.3 billion, surpassing its earlier forecast by more than $800 million. This adjustment is largely attributed to the ongoing conflict in the Middle East.
In response to the fluctuations in fuel prices and evolving economic conditions, the airline has scaled back its domestic flight capacity for the current quarter. Qantas has indicated that both fuel suppliers and government entities are assuring stability in fuel availability through the end of April and into May.
Due to the heightened fuel costs and the uncertain situation in the Middle East, Qantas has announced a reduction in domestic flights, anticipating an additional $800 million in fuel expenses. To alleviate the repercussions of the conflict, the airline has opted to raise ticket prices, modify flight capacities, and adjust its international service network.
In its latest announcement, Qantas revealed a significant increase in fuel cost estimates for the second half of the financial year, now projected at up to $3.3 billion, compared to the prior estimate of $2.5 billion. The airline is actively monitoring the fuel landscape and collaborating with government bodies and suppliers, who continue to express confidence in fuel supply stability.
Further adjustments may be forthcoming, as Qantas has indicated it retains the flexibility to implement additional measures to address rising fuel costs over time.
Qantas has also reported a reduction of approximately 5 percentage points in its domestic capacity for the fourth quarter. The airline has reached out directly to affected customers of both Qantas and Jetstar, offering them alternative flight options or refunds.
The decision to cut capacity stems from ongoing fuel price instability and unfavorable global economic factors. Despite these challenges, Qantas has noted strong demand for international travel to Europe, prompting a redeployment of resources from the U.S. and domestic routes to enhance services to destinations like Paris and Rome.
Although Qantas does not operate flights in the Middle East, it is working with partner airlines to provide customers with alternatives for rescheduling or obtaining refunds. The airline has adjusted its forecast for international revenue per available seat kilometer, now estimating it to be twice its previous guidance, which reflects fares sold prior to the outbreak of the conflict.
Additionally, Qantas will be discontinuing all flights to and from Mount Gambier, a regional city in South Australia, starting next month due to rising fuel expenses and diminished demand. The airline is preparing to release a comprehensive list of route changes upon request.
Last month, Jetstar announced a reduction in services between Australia and New Zealand, citing similar fuel cost pressures. The Qantas subsidiary confirmed that 12 percent of flights on certain routes between Auckland and Sydney, as well as Auckland and Brisbane, would be affected starting May. Services within New Zealand, specifically between Auckland and Christchurch, as well as Auckland and Wellington, will also see reductions, with Jetstar assuring that impacted passengers have been contacted about their travel options.
In light of the current uncertainties, Qantas has canceled its planned $150 million share buyback program. The airline noted that since its last financial update in February, jet fuel prices have more than doubled and remain unpredictable. While the Group has hedged approximately 90 percent of its exposure to crude oil for the second half of 2026, it remains vulnerable to fluctuations in jet refining margins, which have risen dramatically from $20 per barrel in February to a peak of around $120.
Despite these challenges, Qantas is set to proceed with its interim dividend payment as scheduled. As of midday AEST on Tuesday, shares of Qantas had decreased by 0.8 percent, contrasting with a general rise in the broader market.
