Qantas cuts flights, Westpac braces for pain as oil shock hits home
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What is the main topic discussed in this episode?
Welcome to Fear and Greed, business news you can use today.
How are Qantas and Westpac affected by the Middle East conflict?
Qantas and Westpac are among a growing number of businesses warning that earnings will be hurt by the war in the Middle East. Business and consumer sentiment tumble and the Hollywood A-list crowd come out against a merger of Paramount and Warner Brothers Discovery. Plus, the Reserve Bank deputy governor says local interest rates are likely to need to rise to contain inflation and the Federal Coalition's immigration policy includes shades of Trumpism. It is Wednesday, the 15th of April, 2026. I'm Michael Thompson, and good morning, Sean Aylmer.
Morning, Michael. Quick shout out to Charlie Boy, my eldest child, my oldest son, 24 today. Happy birthday, Charlie Boy.
What impact do rising oil prices have on Australian businesses?
Happy birthday, Charlie. Well, this one's for you, Charlie. I mean, it's about business.
Why is Qantas cutting domestic flights and what are the financial implications?
I don't know whether he even wants this story to be dedicated to him, but... It's probably not. It's his. It's his. The main story this morning, Sean. Australian businesses are feeling the heat now from higher oil and energy prices and are starting to outline plans to mitigate increased costs flowing from the Middle East conflict. Qantas yesterday warned of a blowout in fuel costs, while Westpac said it'll increase its bad debt buffers.
What challenges is Westpac facing due to interest rate volatility?
Concerns that energy-intensive business customers will be squeezed. First... Let's talk about Qantas. The airline announced it is going to cut domestic flights as it tightens its belt to deal with a fuel bill that could be $800 million higher. Thanks to the spike in oil prices, higher international airfares will only partially offset the rising fuel costs. For the current half year, Qantas expects fuel costs to come in at around $3.2 billion. That is huge.
That is a lot of money. While 90% of Qantas' exposure to crude oil is hedged or effectively locked in at a lower price, the cost of refining the crude oil into jet fuel has gone up from about $20 a barrel to about $120 a barrel, at its peak at least. That's actually what is hitting Qantas.
How are consumer and business sentiments changing in Australia?
The national carrier is still seeing strong demand for flights into Europe. In fact, it's actually redeployed aircraft flying domestically and into the US, so it can increase flights to Paris and Rome. The flight corridor it's using, which I kind of thought was interesting, is via Armenia and Azerbaijan. You can't use Russian airspace and you can't use Middle Eastern airspace. So that's what they're doing. But overall, domestic down 5%, $800 million extra in fuel costs. And that's going to hit earnings.
Yeah, that's interesting. And about the Russian airspace, I was talking in the afternoon report yesterday about all of the Chinese airlines that are increasing the number of flights that they are doing to Europe and decreasing the number that are coming essentially here to Australia. But it is largely because they can do it more cheaply and more efficiently because they can fly over Russian airspace, whereas others can't. It's really interesting. Now, uh so that's quantus westpac was the other company that we mentioned the bank has said that earnings in its markets division has been have been hit by interest rate volatility caused of course by the middle east war and it said it expected higher inflation and interest rates and a slower economy which will create a challenging environment for
What does the Reserve Bank deputy governor say about future interest rates?
for some customers. The customer's hardest hit, perhaps unsurprisingly, are likely to be those using diesel, including the farming, logistics and transport sectors.
While the full impact of the war has yet to run through the lending book, the bank has upped its provisions for bad debts in expectation of a slowing. Unrelated to the Middle East conflict, Westpac also said the sale of its Rams mortgage portfolio was on track for completion. However, transaction costs will reduce this year's half-year profit by $75 million. The bank's share price fell nearly 3% yesterday. There are other companies downgrading yesterday on the back of higher energy prices. For example, Clean Away Waste Management cut its earnings guidance, citing higher fuel and logistics costs.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:06–0:09
2
How are Qantas and Westpac affected by the Middle East conflict?
0:09–0:47
3
What impact do rising oil prices have on Australian businesses?
0:47–0:52
4
Why is Qantas cutting domestic flights and what are the financial implications?
0:52–1:17
5
What challenges is Westpac facing due to interest rate volatility?
1:17–2:12
6
How are consumer and business sentiments changing in Australia?
2:12–3:27
7
What does the Reserve Bank deputy governor say about future interest rates?
3:27–4:36
8
What is the federal Coalition’s stance on immigration policy?
4:36–17:06
Speakers
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