Qantas has announced it will raise fares, reduce its domestic capacity and change its international flight network after the US-Iran conflict caused a spike in global oil prices.
The airline group now expects to spend as much as $3.3 billion on jet fuel in the first half of 2025/26, up from an original estimate of $2.5 billion.
Given the volatility affecting prices and the global economy, Qantas will cut domestic capacity in the June quarter by about five percentage points.
Most reductions would happen on key routes between capital cities, where Qantas flies larger aircraft at higher frequencies and, when possible, the company would withdraw capacity at off-peak times, a spokesperson said.
But the impact will be felt by consumers, particularly Australians in regional and rural areas who already bear the brunt of a highly concentrated regional airline sector.
"If Qantas pulls out, that means there's potentially no air service left," University of Sydney transport and supply chain expert Rico Merkert told AAP.
"If there is a competitor, then they could benefit from Qantas's decision, but I don't see any airline having access to cheaper jet fuel.
"They will probably have to increase their fares just to stay in the game."
The federal government's Aviation White Paper, released in August 2024, found ticket prices for flights involving regional airports were on average 52 per cent higher per kilometre than flights between capital cities.
Regional Australians are increasingly under-served, with the number of regional routes falling from 458 to 291 between 1989 and 2021.
Qantas's Adelaide to Mount Gambier service will face the chop from Saturday.
The move has been decried by the Australian Medical Association as patients, particularly older Australians and those with cancer, could find it harder to travel for essential care.
"Our concern is some people will fall through the cracks  - delaying essential care and becoming sicker as a result," the AMA's SA president Peter Subramaniam said.
Across the board, travellers could be expected to pay about five per cent to 10 per cent more for airfares, Flight Centre Travel Group chief executive Graham Turner said.
Even if fuel prices were to ease, consumers could be waiting some time for decreases to trickle down as airlines are likely to try to maintain their tighter capacity to preserve margins.
"Airfares tend to adjust quickly when costs rise, but more slowly when costs fall," RMIT economics professor Angel Zhong told AAP.
Qantas and Jetstar customers with future bookings on cancelled flights are being contacted about alternative options or a refund.
Most of those affected would be offered other flights on the same day as their original booking, the airline said.
It is working with the government and jet fuel suppliers to ensure access to the commodity, although it expects no potential disruptions until well into May.
Qantas, which does not fly to the Middle East, is seeing more demand for international travel to Europe as customers seek alternative routes.
It is redeploying capacity from the US and its domestic network to increase flights to Paris and Rome.
Qantas said it was closely monitoring the situation and had the option to take further action to mitigate fuel cost increases over time.
For now, it's yet to activate a planned $150 million share buyback and is delaying capital expenditures.
Qantas has hedged 90 per cent of its exposure to crude oil costs but, like most airlines, it remains exposed to the cost of refining crude oil into jet fuel.
Refining costs have soared from about $US20 a barrel in February to a peak of around $US120, Qantas said.
The carrier's shares were down more than one per cent in morning trading on Tuesday before recovering to close at $8.98.
Air New Zealand, Air India and Delta Airlines have also reduced capacity in recent days, citing surging jet fuel costs.
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