Qantas Adjusts Operations Amid Rising Jet Fuel Costs Due to Middle East Conflict

Qantas Airways has announced significant operational adjustments in response to soaring jet fuel costs, primarily driven by the ongoing conflict in the Middle East. The airline has revised its fuel cost estimates for the second half of the fiscal year 2026 to between AU$3.1 billion and AU$3.3 billion, a substantial increase from the previous estimate of AU$2.5 billion. This surge in costs is attributed to a dramatic rise in jet refining margins, which have escalated from approximately US$20 per barrel in February to around US$120 per barrel.

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To mitigate the financial impact of these rising costs, Qantas is reducing its domestic flight capacity by approximately 5% in the fourth quarter of fiscal year 2026. Affected customers on Qantas and Jetstar flights are being contacted directly and offered alternative flights or refunds. The airline has also increased fares to offset the higher operational expenses. Despite these challenges, Qantas reports strong demand for international travel, particularly to Europe, prompting the airline to redeploy capacity from its domestic and US routes to increase flights to Paris and Rome.

ABC News AustraliaQantas Group cuts flights and hikes fares amid soaring fuel costsThe Sydney Morning HeraldQantas adjusts FY26 outlook amid surging fuel costsMiddle East conflict blows out Qantas jet fuel costsQantas forced to slash passenger capacity as Middle East war drives up jet fuel costsQantas Airways flags higher fuel costs and capacity changes in FY26 update

The airline's financial outlook has been significantly affected, with analysts projecting a potential full-year profit decline of AU$400 million to AU$500 million due to the escalating fuel costs. Qantas has also announced a cancellation of its planned AU$150 million share buyback, citing the current uncertainty in fuel prices and overall economic conditions. The airline's capital expenditure for fiscal year 2026 is now expected to be at or below AU$4.1 billion, aligning with the lower end of its previous guidance.

Qantas Airways flags higher fuel costs and capacity changes in FY26 update

Qantas has stated, "We are closely monitoring the situation given the ongoing uncertainty in global fuel supply chains," emphasizing its collaboration with government and fuel suppliers to ensure continued fuel availability. The airline's management has indicated that it retains the flexibility to make further adjustments as necessary in response to fluctuating fuel prices.

Middle East conflict blows out Qantas jet fuel costs

While Qantas has taken steps to manage the situation, some analysts and industry observers have expressed concerns about the sustainability of the fare increases and capacity reductions. The trade credit risk management service Coface noted that while higher airfares and capacity reductions have temporarily offset rising fuel costs, this pricing dynamic may not be sustainable in the long term. Additionally, the ongoing conflict in the Middle East has raised broader concerns about consumer confidence and discretionary spending on travel.

The Sydney Morning Herald

Looking ahead, Qantas plans to continue monitoring external conditions and may adjust its operational strategies further in response to the evolving geopolitical landscape. The airline is expected to provide a formal update on its fiscal year 2027 outlook once there is more clarity regarding the impact of the conflict on its operations.

Qantas Airways flags higher fuel costs and capacity changes in FY26 update

• “jet fuel prices have more than doubled and remain highly volatile” — Qantas Statement

ABC News Australia

• “We are closely monitoring the situation given the ongoing uncertainty in global fuel supply chains.” — Qantas Statement

The Sydney Morning Herald

• “The group continues to closely monitor the dynamic environment and retains optionality to take further actions to mitigate fuel cost increases over time,” — Qantas Statement

Qantas forced to slash passenger capacity as Middle East war drives up jet fuel costs