Qantas cuts domestic flights as jet fuel costs soar
Qantas is cutting domestic flights while increasing international capacity as it faces a potential $800 million hit from high fuel prices.
The changes, which also affect budget subsidiary Jetstar, come after the cost of jet fuel more than doubled since the start of US-Israeli attacks on Iran in late February, leading to a rise in global oil prices.
The airline group expects to spend as much as $3.3 billion on jet fuel in the first half of the fiscal year, down from an original forecast of $2.5 billion.
Qantas is working with the government and jet fuel suppliers to ensure access to the commodity, but no potential disruptions are expected until May.
“We are monitoring the situation closely due to ongoing uncertainty in global fuel supply chains,” the airline said in a statement on Tuesday.
Given the volatility affecting prices and the global economy, Qantas will reduce domestic capacity by around five percentage points in the June quarter.
A spokesman said most of the disruptions would be on key routes between capital cities where Qantas flies larger aircraft at higher frequencies.
Where possible, Qantas will withdraw capacity during off-peak periods to try to minimize the impact on customers.
Qantas and Jetstar customers who have booked future flights on canceled flights are being contacted about alternative options or refunds.
The airline said most of those affected would be offered other flights on the same day as their original booking.
Air New Zealand, Air India and Delta Airlines have also reduced capacity in recent days, citing rising jet fuel costs.
Qantas, which does not fly to the Middle East, is seeing increased demand for international travel to Europe as customers look for alternative routes.
It is redeploying capacity from its U.S. and domestic network to increase flights to Paris and Rome.
Qantas said it was monitoring the situation closely and had the option to take further action to reduce fuel cost increases over time.
For now, it has yet to activate a planned $150 million share buyback and is postponing capital expenditures.
Qantas has hedged 90 per cent of its exposure to crude oil costs but, like most airlines, remains exposed to the cost of converting crude oil into jet fuel.
Qantas said refining costs rose from around US$20 per barrel in February to a peak of around US$120.
The carrier’s shares fell more than one percent to $8.91 in morning trading Tuesday.
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