Qantas Airways may raise ticket prices and expand ancillary fees at its low-cost subsidiary Jetstar as it grapples with rising fuel costs, which have contributed to the airline’s lowest pre-tax profit in four years. The company reported underlying pre-tax profits of A$2.06 billion for the fiscal year ending June 30, down sharply due to higher fuel expenses linked to geopolitical tensions in the Middle East, particularly the conflict involving Iran.
During a briefing on Thursday, Qantas CEO Vanessa Hudson indicated the airline plans to pursue additional revenue opportunities, stating that strong passenger demand persists despite broader cost-of-living challenges. “We are going to continue to drive where we see demand,” Hudson said, signaling potential fare increases to enhance earnings.
The impact of rising fuel prices has been most pronounced on Qantas’s aging Airbus A380 fleet, primarily used for long-haul international flights. The airline announced it will retire these aircraft by 2028, four years earlier than originally planned, citing anticipated increases in maintenance costs and operational disruptions. Qantas also revealed plans to purchase up to 20 new aircraft by 2030 as part of its fleet renewal strategy. Potential acquisitions include Airbus A350-1000s and Boeing 787 Dreamliners, though the company does not currently intend to order additional ultra-long-haul A350s, which are intended for the highly anticipated Project Sunrise route between Sydney and London.
Against the backdrop of these operational shifts, Jetstar aims to bolster profitability by increasing fees for services previously included in ticket prices. In recent weeks, the budget carrier introduced charges for placing carry-on bags in overhead lockers—a move that sparked consumer backlash. Jetstar CEO Stephanie Tully told investors that this initiative is part of a broader strategy to unbundle services from base fares, keeping list prices lower while generating more ancillary revenue. “We’ve got many more to come,” Tully said of planned fees related to baggage, preferred seating, cancellation rights, meals, and snacks.
Ancillary fees currently account for over A$1 billion of Jetstar’s roughly A$6 billion in annual revenue. The company expects this figure to increase substantially as new add-on charges roll out. The average Jetstar fare rose to about A$150 in the past year, up from nearly A$100 in 2022.
Overall, Qantas reported revenue growth of 7% to A$25.5 billion but absorbed an additional A$610 million in fuel costs, which negatively affected profit margins. The airline experienced a strong financial performance in the first half of the fiscal year, posting a record pre-tax profit of A$1.46 billion to December, as domestic and international travel rebounded despite economic pressures.
Qantas has also benefited from a rise in marquee customers shifting from airlines with Middle East stopovers, as well as continued growth in its loyalty program. The frequent flyer scheme’s underlying earnings rose 12% to A$625 million, supported by a 6% increase in active members and the expansion of partnerships, including with Uber.
Looking ahead, Qantas anticipates the loyalty program will grow earnings by at least 5% in the coming year and aims to reach A$800 million by 2030, despite impending reforms of credit card reward schemes following a ban on card surcharges. The airline’s shares rose more than 4% in midday trading on Thursday.