Qantas Revises FY26 Outlook with $3.3 Billion Fuel Bill and Capacity Cuts

Fuel Costs Surge Amid Middle East Conflict

Qantas Group (ASX:QAN) has revealed a striking escalation in its fuel cost outlook for the second half of FY26, with jet fuel prices more than doubling since its half-year results announcement. Despite hedging approximately 90% of its crude oil exposure, the airline remains vulnerable to jet refining margin spikes, which have surged from US$20 to around US$120 per barrel since February. This volatility has pushed the Group’s estimated fuel bill for 2H26 to between $3.1 billion and $3.3 billion, significantly higher than previous forecasts.

The company is collaborating closely with the Australian Government and fuel suppliers to secure jet fuel availability through April and May, though ongoing uncertainty in global supply chains persists.

Capacity Adjustments and Revenue Upside

In response to the geopolitical turmoil and fuel cost pressures, Qantas has strategically reconfigured its network. While it does not fly directly to the Middle East, the Group has offered increased flexibility to customers booked on partner airlines affected by the conflict. Notably, Qantas is redeploying capacity from the US and domestic routes to bolster flights to European cities such as Paris and Rome, capitalising on strong demand for alternative routes.

However, the Group has trimmed domestic capacity by around 5% in 4Q26, reflecting caution amid volatile fuel prices and global economic headwinds. Affected customers are being proactively contacted with alternative options or refunds.

Despite these challenges, Qantas has doubled its international unit revenue (RASK) growth guidance for 2H26 to 4–6%, a striking revision that includes revenue already booked prior to the conflict. Domestic RASK growth is expected to remain positive at approximately 5% for 2H26 and 6% for 4Q26, assuming current demand levels hold.

Financial Discipline and Deferred Buyback

Qantas continues to maintain a robust financial position in line with its Financial Framework. The Group has confirmed FY26 capital expenditure will be at or below $4.1 billion, the lower end of its previously guided range. Meanwhile, the $300 million interim dividend declared in February will be paid as scheduled, consistent with the confirmed fully franked interim dividend announcement.

However, the planned $150 million on-market share buyback has been postponed amid the uncertainty, signalling a more cautious capital management approach. Net debt is expected to remain within the Group’s target range by 30 June 2026.

Outlook Remains Fluid

Qantas has emphasised the fluidity of the current environment, with fuel price volatility and geopolitical risks continuing to cloud the outlook. The Group will provide an update on its FY27 guidance at a later date, leaving investors to weigh the implications of these rapid developments on future performance.