Qantas Airways (ASX: QAN) Profit Falls as Fuel Costs Bite

Qantas Airways reported lower full-year earnings after elevated fuel prices and Middle East disruption outweighed growth across its domestic, international and loyalty businesses.

Underlying profit before tax fell $330 million to $2.06 billion in FY26. Statutory profit after tax declined $316 million to $1.29 billion. Underlying earnings per share dropped 14 cents to 96 cents.

The airline calculated the Middle East conflict’s net earnings impact at $420 million. That reflected a $610 million increase in its fuel bill, partly offset by fares, capacity changes and other mitigation.

Fuel Pressure Reshapes the Result

Qantas’ total fuel cost reached $5.7 billion for the year. Brent crude hedging delivered a $400 million benefit, although the group remained largely exposed to jet refining margins.

Those margins rose from US$20 per barrel in February to a peak near US$120. The sharp increase came as business and consumer confidence weakened during the year’s final four months.

Government and large corporate travel demand also softened. However, leisure demand remained resilient, while travellers redirected international journeys away from the Middle East.

Group Domestic generated $1.44 billion of underlying earnings before interest and tax. Qantas Domestic revenue increased 5%, supported by 3% capacity growth.

Jetstar Domestic lifted earnings by 15%, with revenue rising 11%. Meanwhile, Group International underlying EBIT declined to $650 million as higher fuel costs offset stronger demand.

Qantas International revenue grew 8%, while premium-cabin revenue climbed 15%. Jetstar International increased revenue by 14% following 11% capacity growth.

Loyalty Provides an Earnings Buffer

Qantas Loyalty increased underlying EBIT by 12% to $625 million. Active membership rose 6%, while points earned and redeemed each grew 9%.

Members booked a record five million flight Reward Seats during the year. Hotels, Holidays and Tours bookings reached $1.6 billion.

The division remains important because its earnings are less directly exposed to aviation fuel. Qantas expects Loyalty EBIT to grow another 5% to 7% in FY27.

Capital Returns and Balance Sheet

The board approved a fully franked $300 million final dividend, equal to 19.8 cents per share. Payment is scheduled for 14 October.

That follows a $300 million interim dividend paid in April. However, the previously announced $150 million on-market share buyback will not proceed.

Net debt increased to $6.2 billion after $4 billion of net capital expenditure. It remained within Qantas’ target range of $5.5 billion to $6.9 billion.

Liquidity stood at $13.3 billion, including cash, undrawn facilities and unencumbered aircraft and other assets.

FY27 Outlook and Fleet Spending

Qantas expects first-half domestic and international total unit revenue to rise 8% to 10%. Group capacity is forecast to remain flat, with domestic reductions offset by international growth.

First-half fuel costs are expected to reach about $3.6 billion. FY27 capital expenditure is forecast between $4.3 billion and $4.6 billion.

The group received 17 aircraft during FY26 and expects up to 31 more in FY27. Its first Project Sunrise A350-1000ULR is due in April, before the first nonstop Sydney-to-London service in October.

Qantas will begin gradually retiring its A380 fleet from 2028. It expects newer aircraft to support a Qantas International operating margin of 10% to 12% from FY32.