Qantas Airways shares (ASX: QAN) closed the week on with a 7.51% gain, as the company reaffirmed its full-year outlook, with demand holding firm. The update signals that management’s combination of disciplined capacity management and robust hedging is, for now, doing the job.
The Qantas share price was flat into the weekend at A$9.45, holding station above the closely watched 200-day SMA of A$9.37 that was cleared to the upside on the week. The flat close into the weekend suggests markets are comfortable holding the position rather than taking profits, a bullish signal that the stock may have found a near-term floor at a technically key level.
The 200-day SMA has historically acted as a key line of support for Qantas, and the ability to hold above it, even as Brent crude hovers near the $100 per barrel mark has reinforced confidence in what lay ahead.
Why are Qantas shares higher?
The headline out of Qantas’s latest trading update is that nothing has materially changed from the guidance issued in August, and in the current macro environment, that is precisely what markets wanted to hear.
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The carrier confirmed that Group Revenue per Available Seat Kilometre, or RASK, remains on track to grow between 8% and 10% in the first half of FY27 across both its domestic and international networks. That guidance range has been held intact despite a meaningful upward revision to the fuel bill, which now sits at approximately A$3.75 billion for 1H FY27, up roughly A$150 million or 4% from prior estimates.
Qantas has cushioned that blow by hedging approximately 85% of its FY27 fuel requirement, predominantly through Brent crude derivatives, giving the airline considerably more cost certainty than many of its global peers.
Demand provides support
On the demand side, the picture remains encouraging, as international travel demand is described as strong, with a notable tailwind emerging from long-haul travellers choosing to reroute away from Middle Eastern transit hubs amid ongoing regional instability.
That shift is funnelling additional traffic through Qantas’s international network, supporting load factors and yield. Domestically, leisure travel demand is holding up well despite broader cost-of-living pressures on Australian households, while corporate and government travel volumes have remained stable.
Discipline in multiple areas
To manage the higher fuel environment without eroding margins, Qantas is applying a deliberate capacity discipline strategy. Domestic seat capacity will be trimmed by 3% in 1H FY27 and by 4% in the March 2027 quarter, effectively tightening supply to support fare levels. International capacity, by contrast, will grow modestly by 2%, reflecting the stronger demand dynamics on those routes. The strategy essentially transfers a portion of the fuel cost burden to consumers through higher ticket prices, a lever that works as long as demand elasticity remains low.
Capital expenditure guidance was also refined, with Qantas now expecting net capex for FY27 to come in at the lower end of its A$4.3 billion to A$4.6 billion range. The modest reduction in spending signals a degree of financial conservatism that markets tend to reward during periods of elevated operating costs, as it implies stronger free cash flow generation relative to earlier expectations.
Away from the core airline operations, Qantas Loyalty continues to be a quiet but consistent performer. The division remains on track to deliver EBIT growth of between 5% and 7% in FY27, providing a non-cyclical earnings stream that helps smooth out the inherent volatility of the aviation business. All remaining full-year operational guidance was reaffirmed without change.
What Lay Ahead
From a technical standpoint, Qantas’s ability to hold above the 200-day SMA at A$9.37 is an important signal. A sustained break below that level would likely prompt a reassessment of near-term sentiment, while a clean move through resistance at A$9.50 could open the door to further upside. The weekly gain of 7.51% has reset the stock’s short-term momentum to the positive side, though the flat Friday close suggests markets are pausing to assess the macro backdrop before committing to the next leg.
The macro picture remains the central variable. Brent crude near $100 per barrel is a significant headwind for any airline, and while Qantas’s 85% hedging position provides meaningful protection for FY27, the question of what happens to the cost base in FY28 and beyond will eventually come into focus. Hedges roll off, and if oil prices remain structurally elevated, the carrier will face a more challenging cost environment in future periods unless it can sustain or grow its current level of unit revenue.
Another solid week in the bag for Qantas shareholders, the third consecutive positive period that has seen the stock shift the mood. Bulls will no doubt have eyes on A$10 from here, but can they make it a fourth straight green week?
Bull Case:
- Qantas holds above 200-day SMA at A$9.37, confirming technical resilience.
- RASK guidance of 8-10% growth held firm despite rising fuel costs.
- 85% FY27 fuel hedging significantly limits downside from high oil prices.
- Loyalty division delivers steady 5-7% EBIT growth, cushioning airline volatility.
- Capex guided to lower end of range, supporting stronger free cash flow.
Bear Case:
- 1H FY27 fuel bill revised up A$150M to A$3.75 billion, compressing margins.
- Domestic capacity cuts of 3-4% cap volume growth and risk market share loss.
- Near-term resistance at A$9.50 could limit further share price upside.
- High RASK growth depends on consumers absorbing elevated ticket fares.
- Hedging protection rolls off beyond FY27, exposing future costs to oil volatility.
