Qantas FY26 Underlying Profit Before Tax Falls 14% to A$2.06 Billion

Qantas Airways reported underlying profit before tax of A$2.064 billion for the year ended June 30, 2026, down A$330 million, or about 14%, from A$2.39 billion a year earlier. Statutory profit after tax was A$1.29 billion, while the group operating margin fell to 9.2% from 11.1%.

The profit decline came despite higher revenue across several parts of the airline group. Qantas said a surge in fuel prices and disruption linked to conflict in the Middle East changed the operating environment late in the financial year, leaving a net A$420 million earnings impact after fare, capacity and other mitigation measures. Qantas shares nevertheless finished Aug. 27 at A$9.66, up 4.8% for the session, according to the company’s investor site.

Fuel costs erase part of the prior-year profit

In its FY26 results release, Qantas said its total fuel cost rose to A$5.7 billion. The second half alone included a A$610 million fuel-cost increase, partly offset by a A$400 million benefit from Brent crude hedging and by changes to fares and capacity. Management said jet refining margins rose sharply during the period, limiting the protection available from crude-oil hedges.

The domestic businesses remained profitable but earned less than a year earlier. Group Domestic generated A$1.44 billion of underlying EBIT, compared with A$1.52 billion in FY25. Qantas Domestic revenue increased 5% on 3% more capacity, while Jetstar Domestic increased earnings 15% as revenue rose 11% on a 4% capacity increase. Qantas said leisure demand remained resilient, but travel by government and some large corporate customers softened as business confidence weakened late in the year.

International flying showed a larger earnings decline. Group International and Freight underlying EBIT fell to A$650 million from A$903 million in FY25 even as Qantas International revenue increased 8% and capacity rose 7%. Premium-cabin revenue grew 15%, twice the growth rate in Economy, and the airline redeployed capacity toward Europe during the fourth quarter as travelers avoided Middle East connections. Qantas said the combined seat factor on its London, Paris and Rome services reached 90% during that period.

Jetstar International also expanded, with revenue up 14% on 11% more capacity and record passenger numbers. The lower-cost carrier added new international routes as more narrowbody aircraft arrived. That growth helped support the group’s top line, but it was not enough to offset the fuel pressure on the flying businesses.

Qantas Loyalty provided a counterweight to the weaker airline margins. Underlying EBIT at the loyalty division increased 12% to A$625 million, active members grew 6%, and members redeemed a record 5 million flight Reward Seats. The segment’s growth mattered more in a year when the core airline operations faced a materially higher fuel bill.

Cash flow stays strong as the buyback is dropped

Operating cash flow was A$3.9 billion, while net capital expenditure reached A$4.0 billion as Qantas continued its fleet-renewal program. Liquidity at June 30 stood at A$13.3 billion, including A$3.3 billion of cash, A$2.1 billion of committed undrawn facilities and A$8.0 billion of unencumbered fleet and other assets.

Net debt increased to A$6.2 billion from A$5.0 billion a year earlier, but Qantas said the figure remained around the middle of its A$5.5 billion to A$6.9 billion target range. The increase came as the company kept spending heavily on new aircraft. For FY27, management expects net capital expenditure of A$4.3 billion to A$4.6 billion and said net debt is likely to finish the year near the upper end of its target range before trending back toward the middle in FY28.

The board approved a fully franked final base dividend of A$300 million, or 19.8 Australian cents per share. Together with the A$300 million interim dividend announced in February, that brings FY26 base dividends to A$600 million. Qantas also said the A$150 million on-market share buyback announced with its half-year results will not proceed.

That capital-return decision contrasts with FY25, when the company paid A$800 million in dividends, including a special dividend. The comparison is not purely like-for-like because the prior year included that special payment, but it shows how the heavier investment program and less predictable fuel environment are shaping cash allocation. Around 25,000 non-executive employees are also due to receive A$1,000 in Qantas shares under the group’s employee share plan.

FY27 outlook leans on pricing and newer aircraft

For the first half of FY27, Qantas expects total unit revenue to rise about 8% to 10% in both Group Domestic and Group International. That guidance comes with a cautious capacity plan: domestic capacity is expected to fall 3% from a year earlier, international capacity is expected to rise 2%, and total group capacity is expected to be broadly flat.

Fuel remains the largest near-term cost risk. Qantas expects first-half FY27 fuel costs of about A$3.6 billion, including hedging, gross carbon costs and fuel-transformation initiatives. The group said jet fuel prices are likely to remain elevated through the half and that it remains highly hedged in Brent crude oil. Loyalty is expected to keep contributing more steadily, with underlying EBIT forecast to increase 5% to 7% in FY27.

Fleet renewal is another major part of the earnings plan. Qantas took delivery of 17 new aircraft in FY26 and said as many as 31 more could arrive in FY27. Seven Airbus A321XLRs were in operation by the end of the year and the A220 fleet had grown to 12 aircraft, while newer Jetstar narrowbodies continued to replace older capacity.

The international fleet plan is also moving forward. Qantas now intends to begin phasing out its Airbus A380 fleet from calendar 2028 and is discussing the conversion of around 20 existing purchase-right options into firm orders for Airbus A350 and Boeing 787 aircraft from 2030. Management expects the replacement program to reduce operational complexity and support a longer-term Qantas International operating-margin target of 10% to 12% from FY32.

The next shareholder milestones are already dated. The record date for the final dividend is Sept. 16, with payment scheduled for Oct. 14, and Qantas has set its annual general meeting for Nov. 6.