Qantas profits fall 13% as Middle East conflict drives up costs

Qantas posted a net profit of $1.47 billion for the 2025–26 financial year, down from $1.69 billion the previous year, a decline of more than 13%. The airline attributed the slump directly to the war in the Middle East, which has pushed up global oil prices and forced the carrier to reroute flights away from conflict zones, adding significant operational costs.

"The conflict has created a challenging operating environment," said Qantas CEO Vanessa Hudson in a statement accompanying the results. "We have seen sustained fuel price premiums and the need to fly longer routes to ensure the safety of our passengers and crew. These are costs we cannot control, and they have directly impacted our bottom line."

Fuel costs now represent roughly 30% of Qantas's total operating expenses, up from 25% in the pre-conflict period. The airline has also been forced to suspend its direct flights between Perth and London, which previously flew over the Middle East, instead routing through Singapore—adding roughly two hours to flight times and increasing fuel burn.

The profit decline comes after a period of strong recovery for Qantas following the COVID-19 pandemic. The airline had returned to profitability in 2023–24, buoyed by pent-up travel demand and a rebound in international tourism. The current financial year was expected to continue that momentum, but the Middle East war has upended those projections.

Despite the profit dip, Qantas remains profitable overall, and the board declared a final dividend of 25 cents per share, albeit down from 35 cents last year. The airline also noted that demand for travel remains robust, with forward bookings for the upcoming Australian summer holiday season holding steady.

Industry analysts say the broader aviation sector is feeling the pinch. "Qantas is not alone," said aviation consultant Neil Hansford. "Airlines globally are grappling with higher fuel costs and rerouting challenges. The difference for Qantas is that its long-haul network is particularly exposed to the Middle East airspace, so the impact is more pronounced."

Looking ahead, Qantas said it has hedged a portion of its fuel requirements for the current financial year, which should provide some buffer against further price spikes. However, the airline warned that if the conflict continues to escalate, further profit erosion is likely.

Why This Matters

Higher fares for travelers: Qantas may need to pass on increased fuel costs to passengers, potentially pushing up domestic and international ticket prices at a time when Australians are already facing cost-of-living pressures.
Broader industry signal: The profit dip shows that geopolitical conflicts are now a material risk factor for global airlines, beyond the usual cyclical demand shocks.
Economic ripple effects: A weaker Qantas bottom line could affect its ability to invest in fleet renewal, route expansion, and customer service improvements, with knock-on effects for Australian tourism and business travel.

Background

Qantas returned to profitability in the 2023–24 financial year after recording massive losses during the COVID-19 pandemic. The airline had been riding a wave of strong travel demand, with international capacity gradually recovering. However, the Middle East conflict that erupted in late 2023 rapidly escalated, leading to the closure of key airspace corridors. Airlines including Qantas were forced to reroute flights away from the region, adding time and fuel costs. The war also pushed global oil prices to multi-year highs, with Brent crude averaging above $85 per barrel for much of the financial year. Qantas had previously warned investors in February that its profit would be hit, but the full extent of the impact is now clear.

Key Perspectives

Qantas management: The airline argues that the profit decline is due to external factors beyond its control—specifically fuel costs and flight rerouting driven by the Middle East war. CEO Vanessa Hudson emphasized that the company remains fundamentally strong and that demand is resilient. Consumers and travel industry: Travelers may face higher fares as Qantas looks to recover margins. The tourism sector, particularly in Western Australia where the Perth-London route was a key link, could see reduced demand if higher prices deter travel. Analysts and skeptics: Some analysts question whether Qantas could have hedged more aggressively or managed its route network more flexibly. Others point out that the airline's profit decline, while significant, still leaves it in a strong position compared to many global carriers that are still struggling to break even.

What to Watch

Qantas forward guidance in its upcoming investor day for any revision to profit forecasts for the current financial year.
Oil prices and fuel hedging updates: Whether Qantas's hedging strategy adequately protects against further price spikes.
Geopolitical developments: Any ceasefire or de-escalation in the Middle East could quickly relieve pressure on the airline's operating costs and share price.

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