Qantas Airways (ASX:QAN) has issued an update to its FY26 financial outlook, navigating a turbulent landscape shaped by escalating conflict in the Middle East and surging operational costs.
Central to the update is a dramatic spike in jet fuel prices; while the airline has hedged 90% of its crude oil exposure for the second half of the year, it remains vulnerable to refining margins, which have soared from US$20 to nearly US$120 per barrel since February.
Consequently, the group’s estimated fuel cost for H1 FY26 has climbed to between $3.1 billion and $3.3 billion.
In response to these cost pressures and shifting global demand, Qantas is aggressively realigning its network.
The airline is reducing domestic capacity by approximately 5% in the fourth quarter to mitigate volatility.
Conversely, international demand remains robust, particularly for European travel.
To capitalise on this, the group is redeploying capacity from US and domestic routes to bolster flight frequencies to Paris and Rome.
Financially, the airline expects stronger unit revenue, forecasting growth of 4% to 6% for its international operations and 5% domestically.
Despite the fuel-driven headwinds, Qantas maintains a resilient balance sheet, confirming that capital expenditure will remain at the lower end of its guidance at or below $4.1 billion.
While the carrier does not fly directly to the Middle East, it is offering increased flexibility and refunds for passengers booked on partner airlines through the region as it continues to monitor the global supply chain.