Australian airline Qantas is set to reduce its domestic flight capacity and is bracing for a significant increase in fuel costs in 2026 due to surging oil prices driven by tensions in the Middle East.
The spike in oil prices has impacted the aviation industry following Iran’s blockage of oil tankers through the vital Strait of Hormuz trade route in response to US-Israeli strikes on key Iranian sites. Approximately 20% of global oil trade passes through this strait.
Qantas, an international and domestic carrier operating from Heathrow Airport, anticipates that higher international airfares will only partially offset the escalated fuel expenses. Despite hedging its oil supply, the airline expects to spend between $3.1 billion and $3.3 billion Australian Dollars on fuel by June 30, with refinery costs having surged five-fold.
The increased costs are projected to add between $600 million and $800 million, approximately £400 million, to Qantas’s fuel expenditure in the latter half of the year, although improved earnings from international flights are expected to partially offset this. The airline foresees doubling its revenues per available seat kilometre from international flights following reduced services by major Middle Eastern airlines amidst the conflict.
In response to the higher fuel prices and potential supply scarcity, Qantas is planning to trim its domestic and regional services, expecting a 5% reduction in seat capacity in the near future. Flights that are not at full capacity will be discontinued, with services being consolidated on high-demand capital city routes.
Qantas affirmed its cooperation with the government and jet fuel suppliers to ensure continued fuel supply throughout April and into May. The airline is closely monitoring the global fuel supply chain dynamics due to ongoing uncertainties.
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