The Qantas Airways Ltd (ASX: QAN) share price has dropped 1% after giving the market an update about the current situation.
Qantas is the largest Australian airline with its Qantas and Jetstar brands offering domestic and international flights. The company also has a freight segment and Qantas loyalty (points).
How is fuel impacting the airline?
Qantas noted that since its FY26 half-year result, the airline as seen jet fuel prices more than double and remain highly volatile.
It has hedged approximately 90% of its FY26 second half exposure in crude oil but is largely exposed to movements in jet refining margins, which has increased from US$20 per barrel in February to a peak of around US$120 per barrel.
As a result, the estimated fuel cost for the second half of FY26 is now between $3.1 billion to $3.3 billion.
It’s working with the government and jet fuel suppliers who continue to provide confidence in fuel supply for the remainder of April and well into May.
Customers, capacity and fares
The airline has made changes to its international network, capacity adjustments and fare increases.
Firstly, while it does not operate to the Middle East, it has provided additional support to customers booked to travel on partner airlines, including more flexibility to move flights or receive a refund.
Qantas said it’s still seeing strong demand for international travel to Europe as customers seek alternative routes. It has redeployed capacity from the US and its domestic network to increase flights to Paris and Rome.
The company has decided to reduce its domestic capacity in the fourth quarter of FY26 by around 5%. Customers are being contacted directly and offered alternative flights or a refund.
Group international unit revenue (RASK) growth in the second half of FY26, which is now expected to be between 4% to 6%, which is double the previous RASK guidance. That includes the 50% of revenue for the fourth quarter of FY26 that was sold before the conflict commenced.
Group domestic RASK growth is expected to be 5% in the second half, and 6% in the fourth quarter. That assumes current demand levels are sustained across the domestic and international segments.
It said it retains the “optionality” to take further actions to mitigate fuel cost increases over time.
Financial update
Qantas said that its capital expenditure will now be at or below $4.1 billion, which is the bottom end of its previously guided range.
Due to the uncertainty, the planned $150 million share buyback has not commenced.
Net debt is now expected to be at or above the middle of its net debt target range at 30 June 2026.
Final thoughts on the Qantas share price
It’s hard to say what will happen next in the Middle East – fuel is still not flowing out of region despite talks between the US and Iran.
Qantas can offset some of the pain with higher airfares, but demand may be impacted if fares go too high.
I think this could be an interesting opportunity to look at the Qantas share price during this difficult period following the 15% decline this year. It could go even lower, it depends what happens next. But, there are better valued ASX growth shares, in my view.
