Qantas will slash domestic capacity over the next two months and likely raise airfares as soaring fuel prices threaten a $500million hit to full-year profit. 

'Given the continued volatility in fuel prices and the global economic conditions, (Qantas Group) has reduced domestic capacity in (the fourth quarter of the 2026 financial year) by around 5 percentage points,' a statement on Tuesday said.

'Affected Qantas and Jetstar customers are being contacted directly and offered alternative flights or a refund.'

Although around 90 per cent of its crude oil supply is hedged, jet refining margins have surged.

As a result, Qantas estimated that it could be paying between $3.1billion and $3.3billion for the six months up to June 30, the second half of this financial year.

This is expected to cost the airline an additional $600million to $800million in their fuel bill for the second half of this year. 

'The group is working closely with the government and jet fuel suppliers, who continue to provide confidence in fuel supply for the remainder of April and well into May,' the airline said.

'We are closely monitoring the situation, given the ongoing uncertainty in global fuel supply chains.'

Aviation industry consultant Tony Webber, warned the Australian Financial Review in March that the airline's earnings could drop to $544million if conflict in the Middle East continues.

Mr Webber, who is a former chief economist for Qantas, also projected the cut to domestic flights.

'They will cut capacity most on longer sectors where fuel costs are a higher percentage of total costs and where reducing capacity provides the strongest fare response – usually routes with more business and fewer leisure travellers,' he said.

In its statement on Tuesday, Qantas said it does not operate in the Middle East but has seen strong demand from people chaoosing to fly to Europe on alternative routes.

'In response, the Group has redeployed capacity from the US and its domestic network to increase flights to Paris and Rome,' it said.

For Australians looking to travel to or through the Middle East, the removal of seats from flight schedules pushes serious demand onto other routes.

Many major airlines have hiked their international fares significantly, including Qantas, which imposed a 5 per cent increase on international fares in March. 

Some tickets have appeared at an extraordinarily high price. Cathay Pacific attracted attention for advertising business class tickets from Sydney to London (via Hong Kong) for close to A$40,000 return.

'This is obviously very expensive,' CQUniversity Associate Professor in Aviation Steven Leib said in an article for The Conversation.

'However, it is a natural result of the way most airlines use 'dynamic pricing'. 

'In essence, airlines are trying to identify (typically by analysing your flight searches) the highest price you're willing to pay, so they can sell you a ticket at that price.'

Associate Professor Leib warned flight schedules many not be as reliable as passengers would typically expect in the next couple of months.

As a result, he advised Australians planning to travel should buy flexible fares and travel insurance - although they both mean added costs.

For those already booked on flight, he highlighted that some airlines have cancellation or rebooking policies for passengers affected by the conflict for travel within a specified window of time.

'Airlines may offer fee waivers, free rebooking or penalty-free cancellations,' he said.

'But those whose dates aren't eligible shouldn't proactively cancel their flights themselves. 

'Waiting for the airline to formally say, 'we can't take you there' gives you the best chance of ensuring it remains responsible for rebooking, a refund and other accommodations.'