Qantas is cutting domestic flights across Australia after a surge in jet fuel costs pushed its expected bill to as much as $3.3 billion, forcing the airline to scale back capacity, delay spending plans and rethink its network. The move comes as global oil markets remain volatile following escalating tensions involving Iran, with airlines worldwide adjusting operations in response.
The airline group said on Tuesday it now faces an additional $600 million to $800 million in fuel costs compared with earlier estimates, driven largely by a sharp rise in refining margins. While crude oil exposure has been mostly hedged, Qantas remains exposed to the cost of converting oil into jet fuel — a component that has surged from about $US20 a barrel in February to peaks near $US120.
That spike has been linked to disruptions in global supply chains after conflict in the Middle East, including constraints around key shipping routes such as the Strait of Hormuz. The result has been a rapid increase in aviation fuel prices, hitting airlines even if they do not operate directly in affected regions.
Qantas said it is working with government and suppliers to secure fuel supply, with no immediate disruption expected until at least May, but warned that uncertainty remains high. The airline is closely monitoring the situation as pressure builds across both costs and demand.
Domestic cuts as demand weakens and costs rise
In response, Qantas and its low-cost arm Jetstar will reduce domestic capacity by around five percentage points in the June quarter. The cuts will primarily affect major routes between capital cities, where the airline operates high-frequency services using larger aircraft.
Where possible, reductions will be focused on off-peak flights to limit disruption. Customers affected by cancellations are being contacted directly and offered alternative flights or refunds, with most expected to be rebooked on the same day.
The decision reflects not just rising fuel costs but also softer domestic demand, as households continue to feel pressure from inflation and a broader cost-of-living squeeze. Higher airfares — already rising as airlines pass on some costs — risk further dampening demand over time.
Other global carriers including Air New Zealand, Air India and Delta Air Lines have also reduced capacity in recent days, highlighting the widespread impact of fuel volatility across the aviation sector. According to the International Air Transport Association, fuel remains one of the largest and most unpredictable expenses for airlines, particularly during geopolitical disruptions.
International shift and financial pressure
While domestic flying is being scaled back, Qantas is redirecting capacity toward international routes, particularly to Europe. The airline said it is increasing services to destinations such as Paris and Rome, responding to stronger demand as travellers seek routes that avoid disrupted Middle East airspace.
Aircraft are also being redeployed from the US and domestic network to support this shift, with international revenue expected to rise by 4 to 6 per cent per available seat kilometre — double previous guidance. Even so, the airline said the gains are not enough to fully offset the surge in fuel costs.
The financial impact is already reshaping Qantas’ broader strategy. The airline has delayed a planned $150 million share buyback and signalled that capital expenditure for the 2026 financial year will come in at or below $4.1 billion, the lower end of its previous forecast range. However, long-term fleet investments, including its Project Sunrise ultra-long-haul aircraft, remain unchanged.
Analysts now expect the airline’s full-year profit to take a hit of up to $400 million to $500 million, as higher fuel costs erode margins despite rising ticket prices. Shares in Qantas fell slightly in early trading following the update, reflecting investor concern over prolonged cost pressures.
The situation underscores a broader challenge for airlines: while pricing power has helped offset rising costs in the short term, sustained increases in fuel prices risk weakening demand and limiting how much more can be passed on to passengers. For Qantas, the coming months will depend on whether fuel markets stabilise — or whether further adjustments to its network and spending become unavoidable.
You may like: Powerball winning numbers for April 13, 2026: Jackpot reaches $45 million.
Make Swikblog your go-to source on Google for reliable updates, smart insights, and daily trends.
