Australian national carrier Qantas announced Monday it will raise international and domestic airfares by at least 3 percent and suspend its share buyback program because of rising fuel prices.
However, the airline said it remains confident it can meet its forecast of at least a 40 percent gain in pretax profit for the year to mid-2008, compared with the previous year.
Fares on international flights will rise about 3 percent and domestic airfares would rise 3.5 percent, effective May 9, Qantas said in a statement.
Qantas' budget subsidiary Jetstar also was reviewing its fares, the company said.
Qantas Airways Ltd. shares rose 1.2 percent to A$3.41.
The airline said it had hedged 34 percent of its fuel needs for the year to mid-2009 at a price of US$90 per barrel, mostly for the first half of the fiscal year. It also lifted fuel surcharges in January.
"An increase in base fares is now necessary to partially bridge the widening gap between the actual increase in the cost of fuel and the amount we offset through surcharges or non-fuel cost improvements," chief executive Geoff Dixon said.
"We will continue to monitor fare and surcharge levels and review our network and schedule to optimize capacity."
He said the company viewed it as prudent to suspend its share buyback.
Qantas announced last August it planned to buy back up to 10 percent of its issued capital, depending on market conditions.
The group said Monday it has returned more than 500 million Australian dollars (US$466 million; 300 million) to shareholders since the buyback commenced in September 2007.
ABN Amro Morgans analyst Bill Bishop said investors reacted positively to the announcement because Qantas was "taking steps to protect themselves" in anticipation of continuing high fuel prices.
