Qantas to raise airfares, cut flights as fuel costs rise by $1 billion

Qantas will raise airfares and trim domestic flights as its fuel costs jump by more than $1 billion, nine months after the conflict in the Middle East erupted.

Domestic capacity and route cuts are accelerating from 1 per cent in the first quarter of 2027 to 5 per cent in the second quarter, the airline said, but international flights capacity is expected to remain firm at 2 per cent across the same period.

“[We] will continue to adjust fares and capacity in response to higher fuel costs,” the airline said in a market update ahead of its annual general meeting with shareholders.

The company’s fuel bill for the final six months of 2026 is now expected to be $3.75 billion, up from a previous forecast of $3.6 billion and $1.1 billion higher than for the same period last year.

Airlines have been struggling to contain the impact of fuel prices since the conflict broke out in February this year, setting off a surge in the price of crude and jet fuel.

As well as passing on higher costs to customers, they are putting smaller planes on routes, reduced frequency and cutting some routes altogether.

Qantas has continued to hedge fuel at about 85 per cent for fiscal year 2027.

Even with fare increases and capacity cuts announced, Qantas noted that “demand remains resilient as customers continue to prioritise travel”.

International demand for Qantas and Jetstar services “remains strong, supported by customers redirecting travel away from the Middle East”.

Jetstar’s international capacity will move from a 2 per cent reduction in capacity in the first quarter of 2027 to growing the same amount the following quarter, the airline predicts.

“In April, our first Project Sunrise aircraft arrives. And in October, we launch the first non-stop flight from Sydney to London.”

Qantas chief executive Vanessa Hudson

University of Sydney aviation professor Rico Merkert said the Qantas announcement is “less a sign of weakness than of discipline”.

“Qantas is prioritising yield and profitability over market-share growth, using capacity restraint and pricing power to manage higher fuel costs.”

“The airline has benefited from fuel hedging, which gives it more protection than many unhedged US carriers, but that benefit is not permanent,” said Merkert.

“As hedging contracts expire and are replaced at higher jet fuel price levels, airlines have limited options beyond controlling capacity and passing at least some of those costs on to consumers.”

“In that sense, what we are seeing is less a Qantas-specific issue and more a reflection of the economic realities facing the global airline industry.”

Rising fuel costs have, to date, not impacted the airline’s fleet refresh, including Project Sunrise the plan to offer direct point-to-point non-stop flights from Sydney to London, and Sydney to New York. Fuel costs typically account for about a quarter of an airline’s operating costs.

“While we manage these near-term pressures, we haven’t lost sight of the long term, and we remain firmly committed to our investment in fleet renewal,” chief executive Vanessa Hudson said.

“In April, our first Project Sunrise aircraft arrives,” she said. “And in October, we launch the first non-stop flight from Sydney to London.”

Routes via Singapore to London, and via Perth to Rome, have allowed Qantas to avoid the troubled Gulf region where airports and civilian infrastructure have been periodically attacked.

Domestic leisure demand remains strong. The airline said it was closely monitoring corporate (other than in the resource sector) and government travel, which it described as “stable”.

The airline’s total unit revenue from its domestic and international operations is expected to grow by 8 to 10 per cent in the first half of next year. The impact of capacity cuts from high fuel costs won’t be seen in the group’s results until the second half of 2027, reflecting “the cycling of fare and capacity actions taken in the prior corresponding period,” it said.

Guidance will be provided with the release of the airline’s first half results in February 2027.

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