Qantas has signalled rising airfares and trimmed domestic capacity as jet fuel costs surge amid escalating Middle East tensions, in a revised FY26 outlook. The group says there will also be flow-on impacts for travel advisors managing client expectations and pricing volatility.
In an update to investors, the airline said jet fuel prices have more than doubled since its first-half results, with refining margins spiking from around US$20 per barrel in February to a peak of US$120. As a result, Qantas now expects its 2H26 fuel bill to hit between $3.1 billion and $3.3 billion.
While the group has hedged approximately 90 per cent of its crude oil exposure, it remains vulnerable to sharp movements in refining margins – a factor now driving much of the cost escalation.
Despite the volatility, Qantas said it is working closely with government and suppliers, with confidence in fuel supply holding through April and into May.
Network changes and fare increases
The airline has already begun mitigating the impact through international network changes, capacity adjustments and fare increases – moves that are expected to ripple through to both travellers and the trade.
Although Qantas does not operate services directly into the Middle East, it has stepped in to support customers booked via partner airlines, offering increased flexibility, including rebooking and refunds.
Demand, however, remains resilient – particularly for Europe
Qantas said it is seeing strong international demand as travellers seek to avoid disrupted routings, prompting the airline to redeploy capacity from the United States and domestic network to boost services into key European gateways such as Paris and Rome.
At the same time, the group has trimmed domestic capacity by around five percentage points in the fourth quarter of FY26, with affected passengers being contacted and reaccommodated.
Revenue outlook strengthens – but at a cost
The shifting dynamics are expected to lift yields, with Qantas now forecasting international unit revenue (RASK) growth of 4 to 6 per cent for the second half — roughly double its previous guidance.
Domestic RASK is also expected to rise by around 5 per cent for 2H26 and 6 per cent in the fourth quarter, reflecting both higher fares and disciplined capacity management.
However, around half of Qantas’ fourth-quarter revenue had already been sold prior to the conflict, limiting the immediate upside from fare increases.
What this means for travel advisors
For travel advisors, the update signals a period of heightened complexity – and opportunity.
Rising fares, particularly on long-haul routes, are likely to test price-sensitive clients, especially as fuel-driven increases flow through more broadly in coming months.
Advisors should expect continued volatility in pricing, with airlines retaining the flexibility to adjust capacity and fares at short notice.
At the same time, strong demand for Europe – coupled with Qantas’ redeployment of capacity – presents opportunities to secure alternative routings for clients impacted by disruptions through the Middle East.
Advisors will also need to navigate increased schedule changes, particularly domestically, as capacity is trimmed. Proactive communication and flexibility will be key, especially for clients travelling in the second half of the year.
Importantly, Qantas’ willingness to offer flexibility for disrupted partner airline bookings highlights the growing importance of airline relationships and ticketing strategies — particularly for complex itineraries.
Financial discipline remains
Despite the cost headwinds, Qantas said it remains in a strong financial position, with capital expenditure now expected to come in at or below $4.1 billion for FY26.
The airline will proceed with its $300 million interim dividend, payable on 15 April, but has paused a planned $150 million share buyback amid ongoing uncertainty.
Net debt is expected to sit around the middle of its target range by the end of the financial year, with further guidance on FY27 to be provided once market conditions stabilise.
For now, the message to the market – and the trade – is clear: volatility is set to continue, and agility will be critical.
