Australia’s national airline Qantas will increase airfares sold in Australia for domestic and international flights by 3.5 and 3 per cent respectively from May 9.

In an effort to minimise the impact of fuel prices Qantas will reduce overall costs, including a hiring freeze and cutting back on non-essential spending as well as suspending it share buyback program.

The national carrier has stated that while rising fuel prices have been a concern, it remains confident of meeting its guidance for a lift in 2007/08 reported pre-tax profit of at least 40 per cent, from the previous year.

The airline’s low cost offshoot Jetstar is currently reviewing its fare levels. Proposed increases to Qantas fares sold outside Australia are also under consideration.

Qantas chief executive Geoff Dixon said the group’s fuel hedging program, its two brand strategy and efficiency gains from its sustainable future program to had enabled it to manage higher fuel costs to date.

“The continuing rise of jet fuel prices is of concern, however we have hedged 34 per cent of our 2008/09 needs at a price of $US90 ($96) per barrel,” he said.

Qantas said the majority of its hedging is in the first half of the fiscal year and is predominantly in the form of options contracts.

“But if high fuel prices persist beyond this point it would be of increasing concern,” Mr Dixon said.

“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,” he said.

“We will continue to monitor fare and surcharge levels and review our network and schedule to optimise capacity.”

Mr Dixon said that due to fuel price volatility the group believed it was prudent to suspend an on-market share buyback program, which began last September.

The group has so far returned more than $500 million to its shareholders.

“We remain confident of meeting our guidance for a 2007/08 result of at least 40 per cent higher than the 2006/07 reported profit before tax,” Mr Dixon said.

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