Australia’s second-largest airline has announced its own March price hikes after Qantas said yesterday it would be reducing travel capacity and raising airfares in the wake of the conflict in the Middle East.

Qantas on Tuesday revealed its second-half fuel bill would rise by $800 million to $3.3 billion, leading to an announcement that it would cancel all services in and out of the regional South Australian city of Mount Gambier from May 18, citing fuel costs and declining demand.

The airline operates services between Mount Gambier and Adelaide four days a week, and the decision leaves Regional Express (REX) Airlines as the sole operator at the airport, which has flights to both Adelaide and Melbourne seven days a week.

Kerry Meares, who co-owns Coonawarra Experiences in Penola, said the cancellation of Qantas flights would reduce access to the region for visitors and locals alike.

“It just means that you’ll find people having to spend more time travelling on the road and taking more time out of the business to attend appointments or be involved in industry events,” she said.

Meares said she was frustrated about the cancellations, saying that driving to Adelaide for industry events takes multiple days out of business operations.

“We were going for a medical appointment in June, plus an industry event. Now, we’ve got to decide whether we can continue,” she said.

“Probably what’s in the background for many operators, I would imagine now, is, ‘What does this mean for general visitation in terms of how many people will cancel trips or reconsider trips’.

“A lot of people are starting to get Covid feels about this.”

New Mount Gambier MP Travis Fatchen was disappointed, saying reliable and affordable transport was essential for the Limestone Coast.

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“Not just for convenience, but for people needing to travel for medical appointments, for businesses to stay connected, and for specialists to access our community,” he said.

Fatchen said his immediate focus was on working collaboratively with the state government and operators like Regional Express Airlines to ensure stable and reliable air services were maintained into the future.

“We also need to look at practical ways to make regional travel more affordable. Other states are already doing this; Western Australia has a capped airfare scheme for regional residents, and Victoria has introduced capped regional public transport fares,” he said.

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“These are the kinds of initiatives we should be exploring here in South Australia to support regional communities.

“At the end of the day, this is about making sure people in the Limestone Coast are not left behind. We need certainty, affordability, and solutions that actually work for the people who rely on these services every day.”

Mount Gambier Mayor Lynette Martin said the cancellation was disappointing for Mount Gambier and the wider Limestone Coast region.

“Our community relies on regular and reliable air services to Adelaide for business, health and education, including fly-in, fly-out medical specialists who support Mount Gambier Hospital and specialist services,” she said.

“Qantas has previously promoted the Mount Gambier route as supporting the tourism market, yet is now withdrawing the service despite the sector performing strongly.

“Regional aviation is not a luxury; it is an essential service. Government policy must ensure regional air connectivity remains viable and sustainable, recognising its critical role in economic development, social connection and access to essential services.”

While Mount Gambier accommodation manager of The Barn Kent Comley was surprised and disappointed to hear about the cancellation, he did not think it would have a major impact on the business.

“I guess they are only flying in three times a week, so it doesn’t have a major effect on capacity,” he said.

Comley said most people using the flights who stayed at The Barn were government workers and business people, and thought they would instead travel with Rex or drive.

He said The Barn had already seen a number of cancellations from people concerned about the availability of fuel.

“I think we need to let this play out,” he said.

“The most important thing from our perspective is that customers are reassured that there is a fuel supply in the regions and that they have confidence to travel.”

In today’s latest announcement, Virgin Australia was more confident about the effectiveness of its fuel hedging, even though it’s currently facing an increased cost of between $30-40 million in the second half of its financial year.

Virgin Australia today also said fare increases and capacity cuts would help protect earnings and left its profit outlook unchanged.

“Like the broader aviation sector, we are experiencing rising operating costs, now exacerbated by the situation in the Middle East,” a Virgin Australia spokesperson told InDaily.

“In response to the external operating environment, we have taken measured actions, including modest fare increases and targeted capacity adjustments.”

The carrier, which will report its fiscal 2026 results in August, still expects second-half underlying earnings to be higher than the previous corresponding half, when it reported annual earnings of $664.4 million.

“In FY26, the group continues to experience strong customer demand, with higher fuel costs largely mitigated through effective fuel hedging and recent airfare and capacity adjustments,” Virgin told the stock exchange on Wednesday.

For the rest of its fiscal year, Virgin is hedged 92 per cent for Brent crude oil and 71 per cent for refining margins.

This means its exposure is limited to the unhedged portion of crude and refining margins.

In contrast, Qantas said it had hedged 90 per cent of its exposure to crude oil costs but remained exposed to the cost of refining crude into jet fuel.

Federal Trade Minister Don Farrell in Adelaide today said that the government was “doing everything we can” to shore up fuel supplies in response to questions about Qantas cancelling its route to Mount Gambier.

“That is particularly concerning for a range of reasons, not just in the tourism space, but also the ability of people in Mount Gambier to get to Adelaide and vice versa,” Farrell said.

“Our objective at the moment is to try and find access to all those fuels that we need to keep those services running.

“Tomorrow, I’m flying to Singapore to have further discussions with the Singapore government about getting greater access to those fuels.

“And of course, as we know, the Prime Minister’s in Brunei and Malaysia, with the foreign minister, we’re doing everything we can to ensure that we get access to all of the fuel we need to keep this country going.”

Refining costs have soared from around $US20 a barrel in February, when the conflict began, to a peak of around $US120.

– with AAP