Qantas Airways Ltd expects airfares will need to rise to cover the cost of higher fuel prices as its oil hedging contracts expire, its chief executive said on Tuesday.
Qantas has hedged 90% of its fuel needs through the end of June and 50% in the following quarter, Chief Executive Alan Joyce said.
"(Hedging) gives us time to react to that higher fuel price," he said at a conference hosted by The Australian Financial Review. "If we stay at these levels, airfares are going to have to go up."
Oil prices, which touched 14-year highs on Monday, see-sawed on Tuesday as the United States considered acting alone to ban Russian oil imports rather than teaming up with allies in Europe.
Qantas shares were steady in afternoon trade on Tuesday, following an 8% fall on Monday.
Joyce said based on current oil prices, Qantas would need to raise revenue per available seat kilometre - an industry measure mixing fares and the percentage of seats filled - by 7%.
"Seven percent is not massive but it will have an impact on some levels of travel out there," he said.
Joyce said domestic leisure travel demand had recovered to pre-pandemic levels, but business travel demand was lagging.
Demand for international flights was strong in key destinations, with demand for tickets between Australia and London and Australia and Los Angeles higher than before the pandemic, he said.
Jefferies analyst Anthony Moulder said in a note to clients that Qantas was well positioned to raise fares and to slow capacity additions in response to higher oil prices.
(Reporting by Byron Kaye; Writing by Jamie Freed; Editing by Richard Pullin)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
RECOMMENDED FOR YOU