Jet Fuel Costs Stay Elevated, Limiting European Ticket Discounts

Jet fuel prices remain higher than pre-conflict levels even as petrol prices have fallen, keeping European holiday fares from dropping in line with motorists' costs. The difference stems from how jet fuel is priced. In addition to crude oil, refining margins add to the cost of aviation fuel, and those margins rose sharply at the start of the regional conflict and have stayed elevated.

Qantas faces an estimated $600-800 million fuel cost increase. The airline has kept some ticket prices higher than they would otherwise be while supply routes through the Strait of Hormuz face blockades and oil production sites sustain damage.

Qantas chief financial officer Rob Marcolina said last month that even if the conflict ended immediately, supply chains would likely take three to four months or longer to return to normal, keeping prices high. Marcolina also noted that Qantas suppliers have secured additional refined fuel from the United States and that reduced foreign carrier flights into Australia have freed up jet fuel for domestic airlines.

The initial oil price spike reduced demand for jet fuel in Australia by about 20 percent after some low-cost routes were suspended, creating a temporary buffer.

The airline will report full-year results on August 27.

Marcolina said the company is planning for elevated fuel prices into fiscal year 2027 when setting capacity and pricing. Qantas continues work on Project Sunrise, which will use 12 Airbus A350-1000 aircraft on Sydney-London routes. The airline is also considering replacements for its Airbus A380 fleet, which it expects to retire in the early 2030s, though Airbus order books are full into the mid-2030s.