Australian airline Qantas is set to reduce its domestic flight capacity and anticipates a significant increase in fuel costs by 2026 due to a surge in oil prices caused by the ongoing Middle East conflict. The aviation industry has been impacted by rising oil prices following Iran’s decision to block oil tankers’ movement through the crucial Strait of Hormuz trade route. This route handles approximately 20% of the world’s oil trade.
Qantas, a prominent international and domestic carrier operating from Heathrow Airport, foresees a rise in international airfares to partly offset the escalating fuel expenses. Despite hedging its oil supply, the airline expects to spend between $3.1 billion and $3.3 billion Australian Dollars on fuel in the first half of the year, attributing the cost increase to the surge in refinery expenses.
The airline projects an additional expenditure of $600 million to $800 million, approximately £400 million, on fuel in the latter half of the year. However, this might be mitigated by better-than-expected earnings from international flights. Qantas anticipates doubling its revenues per available seat kilometer from international flights due to reduced services by major Middle Eastern airlines amidst the conflict.
With the soaring fuel costs and concerns about supply scarcity, Qantas is planning to slash domestic and regional flight services, aiming to reduce seat capacity by 5% in the upcoming weeks. Flights that are not fully booked will be canceled, and services will be consolidated on high-demand capital city routes.
In a statement, Qantas mentioned its collaboration with the government and jet fuel suppliers to ensure a stable fuel supply through April and May. The airline is closely monitoring the global fuel supply chain dynamics due to the prevailing uncertainty.