Australia airline Qantas sees 2021-22 fuel costs rising

Australia's Qantas Airways expects higher fuel costs for the 2021-22 fiscal year to 30 June from the A$835mn ($603mn) spent in 2020-21 but much lower than prior to the spread of the Covid-19 pandemic.

Qantas spent A$3.85bn on fuel in 2018-19, which was the last year unaffected by the pandemic. Qantas reported a 53.4pc rise in fuel costs to A$474mn in the first half of 2021-22 from A$309mn in the same period in 2020-21. Qantas said around 90pc of its expected fuel requirements in the second half of 2021-22 are hedged through a combination of options and collars.

Qantas plans to update its strategy next month of shifting more of its jet fuel purchases to sustainable aviation fuel (SAF) as part of its long-term target of achieving net zero greenhouse gas (GHG) emissions by 2050. The strategy will also include its 2030 GHG emissions reduction target and significantly reduce waste and single use plastic across all operations, Qantas said.

Qantas agreed with BP in December to buy up to 30mn litres (23,900t) of SAF over three years for flights departing London's Heathrow airport. It also plans to boost its fuel efficiency through the renewal of its domestic fleet of planes with Airbus.

"The challenge of Covid-19 hasn't obscured the challenge of sustainability and emissions. Since January, we've been adding sustainable aviation fuel into our flights from London and we're on the cusp of doing the same out of the US," Qantas chief executive Alan Joyce said.

The impact of Covid-19 is expected to linger in the second half of 2021-22, the airline said. "While travel demand is strengthening and there have been positive developments on international borders in recent weeks, the Omicron variant is likely to negatively impact group profit before interest and tax by an estimated A$650mn in the second half of 2021-22," Qantas said.

Group domestic capacity is expected to be 68pc of pre-Covid-19 levels in the January-March quarter of 2021-22, increasing to 90-100pc in April-June, the airline said. Qantas' international capacity is expected to be 22pc of pre-Covid-19 levels in January-March, increasing to 44pc in April-June.

By Kevin Morrison