Qantas (ASX:QAN) shares have slumped 17% in a month. So how is the airliner responding to rising oil prices?

Crude oil prices remain near 13-year highs.

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a man in a business suit looks at a map of the world above a line up of oil barrels with a red arrow heading upwards above them, indicting rising oil prices.

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Key points

  • Qantas shares under renewed pressure 
  • Russia's invasion of Ukraine sees oil at 13-year highs 
  • Hedged oil exposure and higher ticket prices to buffer impact on Qantas 

Qantas Airways Limited (ASX: QAN) shares are coming under renewed pressure.

Just as the 2-year long pandemic related travel restrictions are lifting across its major markets, the cost of fuel – a major cost for airlines – is heading skywards following Russia's invasion of Ukraine.

While Brent crude oil dipped 0.7% overnight, it remains at a more than 10-year high of US$122 per barrel. That's up from US$78 per barrel on 1 January and $91 per barrel just 1 month ago.

Over that month, Qantas shares have fallen 17%.

So, how is the S&P/ASX 200 Index (ASX: XJO) airline responding to fast rising fuel costs?

Recovering the costs of fuel

Qantas chief financial officer Vanessa Hudson said that higher ticket prices are among the airline's plans to tackle rising fuel costs.

Hudson said (quoted by Bloomberg), "The group is very well placed to be able to recover the cost of fuel if it stays at the levels that it is at the moment."

Hudson also pointed out that Qantas' oil exposure is 90% hedged through June. That will help insulate the company from the immediate impact of rocketing crude prices and offer some support for Qantas shares.

As for lifting airfare prices, Hudson said:

What you need for that is strong underlying demand and relatively stable and rational capacity, and right now we are seeing that. We're seeing very strong leisure demand coming across both our domestic and our international markets.

She added that all of Qantas' major markets for international travel, such as the United Kingdom and the United States are open. And that with Western Australia rejoining the nation, all of its domestic markets are open now without restriction as well.

And people are eager to resume travelling. "The intent to travel over the coming year is as high as it's ever been," Hudson said.

How have Qantas shares been tracking?

Qantas shares are down 11.5% in the new year. That compares to a year-to-date loss of 7.6% posted by the ASX 200.

The Qantas share price remains down more than 35% from its pre-pandemic levels.

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 Bruce Jackson.

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