Background: Qantas is Australia's largest airline, and it's managed to stay standing while domestic rivals like Ansett Australia, Tiger Airways Australia, Bonza, and Regional Express have fallen over. Over the past few years, Qantas has been living its best life - passenger numbers have jumped more than 22% over the past 2 years, and annual profits have consistently exceeded $1.2 billion.

What happened: Unfortunately, Qantas didn't expect a regional war. And if this war persists, Qantas' profit could fall from nearly $1.2 billion down to around $544 million this financial year, according to its former chief economist,. And, that's all thanks to ridiculously costly fuel prices.    

What else: Qantas isn't alone here. Airlines like United Airlines and Air New Zealand are already cutting flight schedules as costs rise. But, there is a bit of a buffer... Qantas has hedged a chunk of its fuel, which means it locks in prices ahead of time. But the more high fuel prices stick around, the more that buffer fades.

What's the key learning?

💡 Fuel is one of the biggest costs for airlines, and it's also one of the most unpredictable. It typically makes up 25% to 30% of Qantas' operating costs, so when oil prices move, profits move with it.

💡 Thankfully for Qantas, fuel hedging delays the pain, but doesn't remove it. Qantas had around 81% of its fuel hedged for the second half of FY26, which has allowed it to lock in cheaper prices and protect short-term profits.

💡 But as these hedges expire, airlines are forced to buy fuel at higher prices... meaning if oil stays high for an extended period, the real profit impact creeps in over time.