Qantas Group has slashed domestic capacity and pushed fares higher after a dramatic surge in jet fuel costs tied to the Middle East conflict sent its projected fuel bill soaring to as much as $3.3 billion for the second half of FY26.
Since issuing its first-half financial results, the Group has seen jet fuel prices more than double and remain highly volatile.
The cost blowout, estimated at $600 million to $800 million above previous forecasts, has forced Australia’s largest airline to cut seats, suspend routes, and warn that more action could follow.
Crucially, this is not a short-term fix. The Qantas Group has extended previously announced schedule changes across its international and domestic network between July and September, pushing cuts deep into the first quarter of FY27.
Why Qantas Fuel Costs Have Blown Out So Fast
The number that explains everything is the refining margin.
The Group has hedged approximately 90 per cent of its 2H26 crude oil exposure but is largely exposed to movements in jet refining margins, which climbed from US$20 per barrel in February to a peak of around US$120.
That gap is the problem. Hedging protects against rising crude. It does not protect against the cost of turning crude into usable jet fuel.
When refining margins spike sixfold in a matter of weeks, even a well-hedged airline feels the pressure fast.
Qantas now assumes market jet fuel will be between $185 to $200 per barrel, excluding hedging, over the June quarter.
The result: a fuel bill now forecast at $3.1 billion to $3.3 billion for the second half of the financial year, against a prior estimate of $2.5 billion. You can track how oil prices have been moving across this period on our Brent and WTI oil price tracker.
Which Qantas and Jetstar Flights Have Been Cut
The domestic cuts are spread across the network, but capital city trunk routes are bearing the brunt.
Qantas plans to cut capacity across Qantas and Jetstar’s domestic network by about 5 per cent in May and June. That reduction has now been extended through to the end of September.
Four routes have been temporarily suspended:
- Melbourne to Hamilton Island (Qantas)
- Melbourne to Coffs Harbour (Qantas)
- Sydney to Busselton (Jetstar)
- Darwin to Gold Coast (Jetstar)
Qantas will also stop flying between Adelaide and Mount Gambier indefinitely, citing low demand and high fuel costs.
On the international side, Qantas’ Sydney to Bengaluru service will be temporarily suspended from August and resume at the end of October.
Both Qantas and Jetstar have also reduced capacity across the Tasman. Together, these changes reduce previously planned Group International capacity by 2 percentage points for the first quarter of FY27.
Routes affected by Qantas and Jetstar capacity reductions, April-September 2026.
Where the Capacity Is Going Instead
Qantas is not grounding planes. It is redirecting them.
The airline has redeployed capacity from the US and its domestic network to increase flights to Paris and Rome, where demand has surged as travellers reroute away from Middle Eastern carriers.
Qantas’ additional Perth-Rome flights have been extended until the end of October, while flights to Paris will revert to three return flights per week from August and continue to operate from Sydney through Singapore.
The changes will provide an additional 2,000 seats to and from Europe each week.
The pivot is paying off on paper. Qantas expects international unit revenue to improve by 4 to 6 per cent in H2 FY26, double its previous guidance.
Domestic unit revenue is also expected to lift around 5 per cent in the second half, reflecting fewer seats chasing the same demand.
What This Means for Your Next Domestic Flight
If you are planning domestic travel between now and September, expect less choice and higher prices. The 5 per cent capacity cut is expected to push domestic fares higher through Q2 2026, as fewer seats chase the same demand.
Travellers booking domestic flights, especially on regional or leisure routes, should keep a close eye on their itineraries as the airline continues to manage one of its most challenging cost environments in years.
Qantas has confirmed that affected Qantas and Jetstar customers are being contacted directly and offered alternative flights or a refund.
Virgin Australia is in a similar position. Virgin told the stock exchange it continues to experience strong customer demand, with higher fuel costs largely mitigated through fuel hedging and recent airfare and capacity adjustments.
Share Buyback Paused, Dividend Still Paid
The $300 million interim dividend (19.8 cents per share) will be paid as planned, but the business will not go ahead with a previously announced $150 million share buyback.
Qantas says FY26 capital expenditure will now be at or below $4.1 billion, the bottom end of the previously guided range.
The airline has also flagged it may need to do more. The Group continues to closely monitor the dynamic environment and retains optionality to take further actions to mitigate fuel cost increases over time.
You can see how other global airlines are responding in our coverage of United Airlines’ flight cuts and fuel outlook.
Investor Outlook
Shares of Qantas rose as much as 1.4 per cent to $8.53 in early trade on the day the FY27 extension was announced, suggesting the market read the capacity discipline as a sign of sound management rather than distress.
The FY27 outlook update has been flagged for a later date, once the fuel environment stabilises.
Qantas Group (ASX: QAN) share price performance over the past 12 months. [ASX]
Also Read: Super Retail Appoints CFO, Rebel & Supercheap MDs
FAQs
Q: Why is Qantas cutting domestic flights?
A: Qantas has reduced domestic capacity by 5 per cent after jet fuel costs surged due to the Middle East conflict. Refining margins spiked from US$20 per barrel in February to a peak of US$120, a cost the airline’s crude oil hedging does not cover.
Q: Which Qantas flights are cancelled?
A: Four routes are temporarily suspended: Melbourne to Hamilton Island, Melbourne to Coffs Harbour, Sydney to Busselton (Jetstar), and Darwin to Gold Coast (Jetstar). The Adelaide to Mount Gambier service has been suspended indefinitely. The Sydney to Bengaluru route will also be suspended from August to late October.
Q: How much will Qantas fuel costs be?
A: Qantas has forecast its jet fuel bill for the second half of FY26 at $3.1 billion to $3.3 billion, up from a prior estimate of $2.5 billion. The increase represents an additional $600 million to $800 million in costs.
Q: Will Qantas domestic fares go up?
A: Yes. With capacity down 5 per cent across major routes and demand holding steady, domestic fares are expected to rise. Qantas forecasts domestic unit revenue to grow by around 5 per cent in the second half of FY26.
Q: When will the Qantas flight cuts end?
A: The 5 per cent domestic capacity reduction has been extended through to the end of September 2026, pushing into the first quarter of FY27. Further changes may follow depending on how fuel prices move.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Colitco does not recommend buying or selling any asset. Readers should conduct independent research or consult a qualified financial advisor before making any investment decision.
Last modified: May 1, 2026
