Qantas flags fare increases and flight cuts as fuel prices surge

The Middle East war continues to weigh on Qantas, which says higher airfares and flight cuts are on the horizon despite strong domestic and international demand.

High jet-fuel costs driven by the conflict saw hundreds of millions shaved off the airline's last annual profit.

"The Qantas Group continues to experience trading conditions in line with the outlook provided at its [financial year 2026] results in August, despite elevated fuel prices," Qantas said in a market update released on Friday morning.

"The Group has and will continue to adjust fares and capacity in response to higher fuel costs."

The statement, released ahead of the carrier's annual general meeting, said domestic flights for Qantas and Jetstar would be cut by a total of four per cent in 2027.

Qantas said it expected fuel costs of $3.8 billion for the first half of the new financial year, and said it had extended hedging for about 85 per cent of its annual bill, predominantly in Brent crude oil.

Hedging is a strategy that is typically used to reduce or offset the risk of financial loss due to unpredictable market movements.

Brent crude oil now sits above $US100 a barrel, up from about $US60 before the US attacked Iran in February.

"Fuel prices are expected to remain elevated through financial year 2027," Qantas said.

The announcement on flight cuts and price rises comes despite strong demand for international and domestic travel, which Qantas said was "supported by customers redirecting travel away from the Middle East".

Corporate and government travel remained stable and was being closely monitored, it said.

The group also cut domestic flight capacity and raised fares in April, citing fuel costs.

In August, the airline reported a 2025/26 net profit of $1.3 billion, down nearly 20 per cent on the previous year.

Its underlying pre-tax profit also fell by nearly 14 per cent to $2.1 billion, despite a 7 per cent rise in revenue to $25.5 billion.

The carrier has also cancelled a planned $150 million share buyback.

Meanwhile, Qantas is still forecasting total revenue per available seat kilometre (TRASK) — a core metric used by the airline industry to measure unit revenue — to rise by up to 10 per cent in the first half of 2026/27 mostly driven by international travel.

The airline's capital expenditure is now expected to be at the lower end of the previously guided range of $4.3 billion to $4.6 billion.

Qantas predicts its new non-stop Project Sunrise flights from Australia to Europe and North America will earn $400 million a year once all the planes are flying by 2031.