Are Qantas shares still a buy after its latest market update?

Qantas Airways Ltd (ASX: QAN) shares are firmly in the spotlight this week after the airline posted a market update and announced new measures to tackle rising fuel prices amid an ongoing conflict in the Middle East.

At the time of writing, the shares are trading 0.72% higher at $9.05 a piece. At one point, just after the market opened, the shares were trading as high as $9.27 each. The latest update means the shares are now down 13.8% for the year to date. However, they’re still 6.1% higher over the past 12 months.

How does tight oil supply and rising prices affect Qantas?

The largest operating cost for airlines is its jet fuel, which is refined from crude oil. 

Australia imports more than 90% of its refined fuel. This means local prices closely follow global oil prices and currency movements. As a result, when oil prices rise due to tight supply or geopolitical tensions, the cost of jet fuel also jumps higher. This then means that airlines, such as Qantas, face higher operating costs which can pressure profits and potentially weigh on their share prices.

What is Qantas doing to offset higher fuel prices?

It was expected that Australian airlines could start to increase ticket prices or add fuel surcharges to help recover some costs, and this was confirmed in the airline’s market update on Tuesday morning.

The company announced that jet fuel prices have more than doubled and remain highly volatile. It confirmed that its fuel costs for the second half of FY26 is now estimated to be significantly higher than prior expectations, at $3.3 billion. It had previously forecast to be around $2.2 billion. 

To offset the higher prices, Qantas will increase ticket prices and reduce domestic capacity by about 5% in May and June. The majority of cuts will be made on routes between major capital cities, where it flies larger aircraft at higher frequencies. It will also temporarily suspend some routes and indefinitely cancel all flights to and from South Mount Gambier from next month. International fares have already risen by 5%.

Are Qantas shares a buy, sell, or hold following the update?

The airline said that around 90% of its second-half fuel exposure is already hedged. Meanwhile, fare increases and route changes will also help to recover part of the pressure.

According to TradingView data, analysts are still very bullish on the outlook for Qantas shares. Out of 15 analysts, 13 have a buy or strong buy rating on the stock. The average target price is $11.30, which implies a 25% upside at the time of writing. However, some think the shares could jump 41.6% higher to $12.80 a piece.

The post Are Qantas shares still a buy after its latest market update? appeared first on The Motley Fool Australia.

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Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.