Qantas Group has signaled that elevated fuel costs will persist through FY27, with first-half fuel expenses now forecast at approximately 3.75 billion dollars. This represents a substantial headwind, yet management has already hedged approximately 85 percent of FY27 exposure, predominantly in Brent crude oil with meaningful participation in lower fuel prices should markets ease. The strategy suggests confidence that cost inflation can be managed despite remaining significantly above historical norms.
Revenue guidance remains intact despite the fuel environment. Total revenue per available seat kilometre (TRASK) for Group Domestic and Group International are each expected to grow between 8 and 10 percent in the first half of 2027 compared to the prior corresponding period, unchanged from guidance provided at the FY26 results in August. This growth trajectory indicates that demand resilience and fare-setting flexibility are offsetting cost pressures. International demand has proven particularly strong, supported by customer redirections away from Middle Eastern routes, while domestic leisure travel continues to perform solidly. Corporate and government travel remains stable, though management notes close monitoring of this segment.
Capacity management forms a central pillar of the response to elevated costs. The company is reducing overall capacity across both divisions, with Group Domestic capacity down between 1 and 5 percent in the first half of 2027 depending on the quarter. Group International capacity faces similar reductions, with Jetstar International declining 1 percent in the first quarter and 4 percent in the second. These adjustments, combined with fare increases, provide dual levers to protect margins and manage demand. This approach differs from aggressive capacity expansions that could strain profitability in a high-cost environment.
Capital discipline is also evident. Net capital expenditure for FY27 is now expected to settle at the lower end of the previously guided range of 4.3 to 4.6 billion dollars. This reduction suggests flexibility in project timing and prioritization as management balances growth investment against near-term cost headwinds. Meanwhile, Qantas Loyalty remains positioned to deliver underlying EBIT growth of 5 to 7 percent in FY27, maintaining the higher-margin division’s trajectory.
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Become an AR or CARInvestors will be watching for first-half FY27 results in February 2027, when management will provide guidance on second-half TRASK growth and must address capacity cycling impacts from the prior year. Fuel hedging effectiveness and whether the company can sustain both volume growth and pricing power amid potentially moderating demand will be critical metrics to assess. This announcement is price sensitive and has been flagged as material by the ASX.
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About Qantas Airways Limited (ASX: QAN)
Qantas Airways Limited provides air transportation services in Australia and internationally through its Qantas Domestic, Qantas International, Jetstar Group, and Qantas Loyalty segments. The company operates both full-service airline services under the Qantas brand and low-cost carrier services under the Jetstar brand, serving routes across Australia, New Zealand, Asia, North America, South America, Africa, and Europe. It also offers cargo, air freight services, and customer loyalty recognition programs.
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