Mercedes Mullins
Qantas Airways Limited is an Australia-based airline that offers international and domestic air transportation services, freight services, and a frequent flyer loyalty program. Qantas has recently been focusing on profitable areas to boost its margins and growth, which has resulted in the closure of Jetstar Asia and the introduction of new aircraft with greater fuel efficiency. Fuel costs account for around 30% of Qantas' cost base, and the airline has benefited from lower fuel costs in recent years, with falling global crude oil prices. Qantas has also been working to replace its ageing fleet, with a recent delivery of its first Airbus A321XLR, which will provide greater range, fuel efficiency, and comfort for passengers.
| Characteristics | Values |
|---|---|
| Percentage of Qantas' costs that are fuel | ~30% |
| Qantas' cost of fuel in 2025 | Lower than previous years due to falling global crude oil prices |
| Jetstar Asia's fuel costs | Double-digit rises |
| Qantas' new aircraft fuel efficiency | Higher than older aircraft |
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What You'll Learn
- Qantas' fuel costs are impacted by volatility in the jet-fuel market
- Fuel costs are lowered by the Airbus A321XLR's fuel efficiency
- Qantas' share price is affected by lower fuel costs
- Qantas' decision to close Jetstar Asia was influenced by high fuel costs
- Fuel costs are a significant expense for Qantas, alongside airport fees and security charges
Qantas' fuel costs are impacted by volatility in the jet-fuel market
Qantas Airways Limited is an Australia-based domestic and international airline. Qantas has recently been impacted by volatility in the jet-fuel market, which accounts for around 30% of its cost base. The airline's share price has surged by 83.7% over the past year, largely due to strong domestic travel demand and increasing overseas travel in 2025. Qantas has also benefitted from lower fuel costs due to falling global crude oil prices.
To remain competitive, Qantas has invested in newer, more fuel-efficient aircraft, such as the Airbus A321XLR, which offers greater range and improved passenger comfort. This strategic move is part of Project Sunrise, which aims to launch non-stop flights from Australia to New York and London in the next decade. Qantas has also made the decision to close Jetstar Asia, its low-cost arm, due to rising costs and competition. Jetstar Asia faced significant cost increases at its Singapore base, including double-digit rises in fuel, airport fees, ground handling, and security charges.
The closure of Jetstar Asia is expected to result in a loss of up to 500 jobs, but it will also release up to A$500 million to be reinvested in Qantas' core businesses. Qantas plans to replace costly leased aircraft with more fuel-efficient options, such as the Airbus A350-1000ULR, which has an extended range of over 10,000 nautical miles. However, the launch of this service has been delayed until late 2026 or early 2027 due to regulatory redesigns of the fuel tank.
While Qantas has been able to boost its margins and remain profitable despite the challenges posed by the volatile jet-fuel market, analysts warn that there are potential risks to the airline's share price. These risks include high operating leverage to travel demand and strong market competition. Qantas is also facing a significant bill of A$20 billion (US$13 billion) to replace its ageing fleet, which could impact its financial performance. Nonetheless, Qantas continues to focus on profitable areas and strategic moves that may set trends for other carriers seeking resilience and growth in the evolving aviation industry.
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Fuel costs are lowered by the Airbus A321XLR's fuel efficiency
Fuel costs are a significant expense for airlines, and Qantas has felt the impact of rising fuel prices, with its Singapore-based Jetstar Asia operations facing "really high cost increases" in fuel charges. However, Qantas has demonstrated its ability to adapt and boost margins by lowering fuel costs through strategic decisions.
One such decision is the focus on profitable areas, indicating a shift towards resilience and profitability in changing markets. Qantas' decision to shutter Jetstar Asia is an example of this strategy, as the airline seeks to recycle funds into its core businesses. This move allows Qantas to replace costly leased aircraft with more fuel-efficient options, improving overall fuel efficiency and reducing expenses.
Additionally, Qantas can further enhance fuel efficiency by utilising aircraft like the Airbus A321XLR. The A321XLR is a highly fuel-efficient aircraft, offering up to 15% better fuel efficiency than its predecessors. This increased fuel efficiency is achieved through new engines, airframe improvements, and the addition of winglets ("Sharklets" by Airbus). The A321XLR also features a permanent Rear Center Tank (RCT) with a 12,900-litre fuel capacity, further extending its range.
The Airbus A321XLR's fuel efficiency not only lowers fuel costs for Qantas but also provides operational flexibility. The aircraft's range of up to 4,700 nautical miles enables the opening of new long-haul routes, particularly for point-to-point operations. This capability allows Qantas to serve new destinations and optimise existing routes, enhancing its network and improving operational efficiency.
By leveraging the fuel efficiency of the Airbus A321XLR, Qantas can effectively manage its fuel costs, improve profitability, and expand its operational capabilities. This aircraft's fuel performance contributes to Qantas' overall strategy of adapting to market changes and positioning the airline for growth in a dynamic industry landscape.
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Qantas' share price is affected by lower fuel costs
Qantas Airways, Australia's flag carrier, has seen its share price affected by various factors, including lower fuel costs. Jet fuel is a significant cost for airlines, often accounting for around 30% of their total expenses. Qantas spent A$5.32 billion ($3.44 billion) on fuel in fiscal 2024, a nearly 17% increase from the previous year.
In May 2025, Qantas shares rose over 5% to a one-month high as oil prices dropped by more than $2 a barrel. This drop in oil prices signalled lower jet fuel costs, easing the financial burden on the airline. Lower fuel costs can improve Qantas' profitability and boost its margins, making it an attractive investment option.
Qantas' share price is also influenced by other factors, such as strong domestic and international travel demand, dividend payments, and competition from rivals like Virgin Australia. In 2024, Qantas' shares hit record highs as the airline raised its domestic revenue expectations and lowered its first-half jet fuel costs due to declining global oil prices.
Additionally, Qantas' strategic decisions, such as closing Jetstar Asia to focus on profitable markets, have demonstrated its commitment to profitability and growth. These moves can impact the share price as investors analyse the company's resilience and potential for future gains.
Overall, Qantas' share price is sensitive to fluctuations in fuel costs, particularly jet fuel. Lower fuel costs can drive up the share price as investors anticipate improved financial performance, while increases in fuel prices may lead to a downward pressure on the share price. Qantas' management of fuel costs and overall operational efficiency play a crucial role in shaping investor confidence and the resulting share price movements.
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Qantas' decision to close Jetstar Asia was influenced by high fuel costs
Qantas Airways' decision to close its low-cost subsidiary, Jetstar Asia, was influenced by a multitude of factors, including high fuel costs. Jetstar Asia, which operated 16 intra-Asia routes from Singapore's Changi Airport, had been facing challenges in recent years, with rising costs impacting its profitability.
Jetstar Group CEO, Stephanie Tully, cited "really high cost increases" at the Singapore base, specifically mentioning double-digit rises in fuel prices, airport fees, ground handling, and security charges. The airline had only reported profits in six of its 20 years of operation, and was expected to post an underlying loss of A$35 million ($22.76 million) before interest and tax for the financial year ending June 30, 2025.
The closure of Jetstar Asia will allow Qantas to recycle up to A$500 million back into its core businesses, largely by replacing costly leased aircraft used by Jetstar Airways domestically. This strategic move demonstrates Qantas' focus on profitability and growth, particularly in the post-pandemic era, where airlines are seeking resilience and improved returns.
While fuel costs played a significant role in Qantas' decision, other factors also contributed to the rising costs at Jetstar Asia. Changi Airport, Singapore's primary aviation hub, had been steadily raising its charges to fund investments and cover higher operating costs. Additionally, the airport's decision to move Jetstar Asia's operations from Terminal 1 to Terminal 4, which is not connected by train to the other terminals, negatively impacted the business.
Qantas' focus on profitable routes and markets is a strategic decision that aims to strengthen its financial position and navigate the challenges posed by volatile fuel prices and rising operational costs. The closure of Jetstar Asia demonstrates the airline's commitment to allocating capital efficiently and prioritizing stronger-performing segments within its group.
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Fuel costs are a significant expense for Qantas, alongside airport fees and security charges
Fuel costs are a significant expense for Qantas, and the airline has been working to reduce these costs in various ways. In 2025, Qantas closed its Jetstar Asia operations, citing "really high cost increases" in fuel, airport fees, ground handling, and security charges. By closing Jetstar Asia, Qantas expected to save up to A$500 million, which could be reinvested in its core businesses. Additionally, Qantas has been upgrading its fleet with more fuel-efficient aircraft, such as the Airbus A321XLR and A350-1000ULR, which offer greater range and fuel efficiency. These newer aircraft will enable Qantas to remain competitive in their pricing and launch new services.
Qantas has also benefited from falling global crude oil prices, which have resulted in lower fuel costs and boosted the airline's margins. The airline's strong financial performance in recent years can be partly attributed to these reduced fuel expenses. UBS analysts predicted that Qantas may see margin expansions due to these lower fuel costs. However, it is important to note that fuel costs are not the only factor impacting Qantas' operations and share price. The airline's performance is also influenced by travel demand, market competition, and its ability to navigate volatility in the jet fuel market.
Airport fees and security charges are also significant expenses for Qantas. In the case of Jetstar Asia, the relocation of its operations from Terminal 1 to Terminal 4 at Changi Airport in Singapore negatively impacted the business. Changi Airport, the world's fourth busiest airport by international passengers, has been steadily raising its charges to fund investments and cover higher operating costs. These additional costs, along with the challenges of operating intra-Asia routes, contributed to the decision to close Jetstar Asia.
Qantas has also faced challenges with its ageing fleet, which has resulted in a A$20 billion (US$13 billion) bill for replacement aircraft. However, the airline has been proactive in addressing these issues, as evidenced by its focus on profitable areas and strategic moves to enhance resilience and profitability. Qantas' decisions regarding fleet upgrades and network expansion demonstrate its commitment to adapting to the evolving industry and overcoming financial challenges.
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Frequently asked questions
Jet fuel accounts for around 30% of Qantas' cost base.
Qantas has had to navigate volatility in the jet fuel market, which has resulted in really high cost increases. However, falling global crude oil prices have also benefited the airline with lower fuel costs, allowing them to boost margins and resume dividend payments.
Qantas is focusing on profitable areas and strategic moves, such as closing Jetstar Asia, to improve profitability and growth. They are also investing in newer, more fuel-efficient aircraft like the Airbus A321XLR to remain competitive in their pricing.
Qantas' share price has been impacted by fuel cost concerns, with a 1% decrease observed following the closure of Jetstar Asia. However, over the past year, the share price has surged 83.7% due to strong travel demand and lower fuel costs.
Qantas' main rival, Virgin Australia, has also benefited from lower fuel prices, which has influenced their share price and outlook.
