Qantas to raise fares, slash flights as Middle East crisis sends fuel costs soaring

Airfares are set to climb as Qantas grapples with a sharp spike in global fuel costs triggered by conflict in the Middle East.

Jet fuel prices have more than doubled since February, with refining margins jumping from about US$20 a barrel to as high as US$120.

This has pushed the airline's expected fuel bill for the second half of FY26 to up to $3.3 billion, between $600 million to $800 million more than expected.

In response, Qantas has increased fares, cut some domestic capacity and reshuffled its network, warning the volatile cost environment is likely to persist.

International unit revenue - a proxy for fares - is now to grow by four to six per cent, roughly double earlier forecasts, while domestic revenue is also rising.

"The group continues to closely monitor the dynamic environment and retains optionality to take further actions to mitigate fuel cost increases over time," the company said in a statement to the ASX.

At the same time, strong demand for Europe is reshaping routes, with more flights added to Paris and Rome as travellers avoid Middle Eastern hubs.

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"The Group has redeployed capacity from the US and its domestic network to increase flights to Paris and Rome," Qantas said.

Qantas has reduced domestic flights by five per cent with off-peak flights on main routes like Sydney-Melbourne-Brisbane likely to be first on the chopping board.

"Affected Qantas and Jetstar customers are being contacted directly and offered alternative flights or a refund," the airline said.

Qantas now expects to spend $4.1 billion or less this financial year, at the lower end of its earlier forecast.

The airline will still pay its $300 million interim dividend (19.8 cents per share) on April 15, as announced in February, but has delayed its planned $150 million share buyback due to ongoing uncertainty.

Chief executive of business class airfare specialist agency Flat Beds, Anthony Riemann, told Explore there had been a clear "softening of demand".

"The main impact of higher prices has been limited availability of seats in the short term," he said.

"In recent weeks, travellers have booked most of the alternate flights that don't go through the Middle East, so the seats that remain are now expensive.

"The increase in fuel prices has exacerbated this and is starting to have an impact on flights 3-6 months from now, too."

Mr Riemann said fuel surcharge increases are "somewhat modest, around $50-200 per international ticket, depending on the airline and route."