Qantas will cut domestic flights due to higher fuel costs and the uncertainty of the Middle East war, as it flags as much as $800 million in extra fuel costs.
This morning the airline said that, to mitigate the impact of the conflict, it had increased fares, adjusted capacity and made changes to its international flight network.
It announced an increase in its fuel cost estimates of up to $3.3 billion for the second half of the financial year. It had previously estimated $2.5 billion.
Qantas said it was closely monitoring the fuel situation and working with government and suppliers “who continue to provide confidence in fuel supply for the remainder of April and well into May”.
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More changes could be ahead, with the airline saying it “retains optionality to take further actions to mitigate fuel cost increases over time”.
Domestic capacity cut on Qantas, Jetstar
Qantas also said it had reduced domestic capacity by about 5 percentage points in the fourth quarter.
“Affected Qantas and Jetstar customers are being contacted directly and offered alternative flights or a refund,” the airline said.
The airline cited the continued fuel price volatility and global economic conditions as reasons for the capacity cut.
Qantas said it continued to see “strong demand for international travel to Europe as customers seek alternative routes”.
“In response, the Group has redeployed capacity from the US and its domestic network to increase flights to Paris and Rome.”
The airline does not operate in the Middle East but said it was working with airline partners to give customers options to move flights or refunds.
It now forecasts its international revenue per available seat kilometre, a profitability measure for airlines, to be double its previous guidance (which includes fares sold prior to the conflict).
Qantas said it would cancel all of its services in and out of the regional South Australian city of Mount Gambier from next month, citing fuel costs and declining demand. ABC News has asked the airline for a list of all changes to routes.
Last month, Jetstar said it would reduce flights between Australia and New Zealand due to rising fuel costs.
The Qantas-owned airline confirmed that 12 per cent of services on some flights between Auckland and Sydney, and between Auckland and Brisbane, will be impacted from May.
Services within New Zealand, between Auckland and Christchurch, and between Auckland and Wellington, will also be reduced, and Jetstar said all impacted passengers had been contacted directly and most had been offered same-day travel.
Share buyback cancelled due to uncertainty
The airline said since its last financial guidance in February, “jet fuel prices have more than doubled and remain highly volatile”.
“The Group has hedged approximately 90 per cent of its 2H26 exposure in crude oil but is largely exposed to movements in jet refining margins, which have increased from $US20 per barrel in February to a peak of around $US120,” Qantas said.
“As a result, the estimated fuel cost for 2H26 is now $3.1 — 3.3 billion.”
The company said it would pay its interim dividend tomorrow as planned but given the “current uncertainty”, its planned $150 million on-market buyback had not commenced.
At about midday AEST on Tuesday, Qantas shares were down 0.8 per cent, while the broader share market rose.
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