Qantas, Jetstar extend cuts to domestic, NZ flights as fuel crisis bites

Qantas is extending cuts to domestic flights by three months and Jetstar is cutting flights to New Zealand as the fuel crisis from the US-Iran war continues to bite.

Australia’s national carrier said its 5 per cent cut in domestic capacity, which originally ran from May to June, would now be extended to September.

International capacity at Qantas will decline by 2 percentage points in the first quarter of 2027 as the airline redeploys its international fleet.

Airlines globally are grappling with a fuel price spike from the Middle East conflict which has limited supply, reduced capacity, driven up oil and jet fuel costs, and diminished demand for flights in some domestic markets.

The airline’s announcement comes as the government revealed it secured two shipments carrying 100 million litres of jet fuel, as well as another shipment of 50 million litres of diesel from sources in Asia.

Trade Minister Don Farrell said the additional 100 million litres of jet fuel to Perth and Brisbane and 50 million litres of diesel to Darwin “will keep our FIFO workers flying, our truckers driving, and our nation moving.”

“It gives Australians the peace of mind they need to travel and see their loved ones and to keep exploring our vast and beautiful country,” Farrell said.

Qantas’ network adjustments come after the airline in mid-April flagged a potential $800 million blowout in fuel expenses, driven by the crisis.

“The Qantas Group continues to take action to mitigate the impact of the conflict in the Middle East, including sustained high fuel costs, and respond to continued strong demand for travel to Europe,” it said.

Additional Qantas Perth-Rome flights have been extended for another three months, until the end of October, the airline said. Flights between Sydney-Paris via Singapore will continue to operate.

The changes, in response to sustained demand for travel to Europe, will add another 2000 seats to and from Europe each week.

Qantas’ service from Sydney to the Indian city of Bengaluru is being temporarily suspended from August and will resume at the end of October. Both Qantas and Jetstar have reduced capacity across the Tasman.

Australia’s largest source of jet fuel imports – China – has signalled a willingness to resume exports of the crucial fuel nearly two months after it curtailed shipments because of uncertainty caused by the conflict in the Middle East.

K2 Asset Management managing director and energy expert George Boubouras said in this market “cancellations will increasingly be normalised if prices stay around current levels for 30 more days.”

The news from China was “good for aviation in the short term,” he said. “But that is not saying much given the challenges [airlines] face.”

The prospect of more jet fuel out of China may limit additional flight cancellations and allow airlines to maintain flight routes, said Milford Asset portfolio manager Jason Kururangi. “Having more jet fuel available for export would definitely be a positive to the global supply-demand imbalance that’s currently present,” he said.

“I think it would definitely be an incremental positive for supplies,” he said. “Then that should result in lower [ticket] prices in the region as well.”

Within a month of the crisis’ start, Qantas, Jetstar and Virgin flagged modest reductions to their routes, as well as increases to ticket prices. This week, Fiji Airways said it would cancel its Fiji-Dallas service from September 7 “due to high fuel costs and changing demand”.

As the global supply of oil came under strain following Israel and the US’ attack on Iran, reports emerged in mid-March that China would limit its jet fuel exports to support its domestic aviation.

This week, following a meeting with Chinese Foreign Minister Wang Yi on Wednesday, Foreign Minister Penny Wong told this masthead China had agreed to take a “first step” to resume critical exports of jet fuel to Australia.

Australia uses about 10 billion litres of jet fuel a year, of which more than 80 per cent is imported, numbers from the Australian Institute of Petroleum show. About 2.6 billion litres a year, or 32 per cent, comes from China, another 1.8 billion or 23 per cent is from Singapore.

It’s not clear how much jet fuel China will release over time.

“We’ll just have to wait and see whether it does have much of an impact,” Australian Institute of Petroleum CEO Malcolm Roberts said. He said it takes three weeks for China-shipped fuel to arrive in Australia.

“Anything that means we’ll see a resumption of jet fuel imports is going to be a relief, although, of course, the problem is the price is still very high. More volume would hopefully put some downward pressure on [ticket] prices,” he said.

Singapore-based Oxford Economics analyst Sheana Yue said whatever the scale of China’s jet fuel sales, it’s “likely to be a controlled, targeted easing rather than a full resumption of refined fuel exports”.

The concerns that prompted China to stop exports in March “still matter”, Yue said, and it will be anxious to protect domestic supply and manage inflation while the Strait of Hormuz remains closed.

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.