Qantas first quarter revenue up by 6.3 per cent to record $4.4 billion

Qantas will have eight Dreamliners in its fleet by the end of next month. Photo / Supplied

Qantas says record first-quarter revenue has helped offset the impact of rising fuel prices.

The airline reported first-quarter group total revenue was up 6.3 per cent to AU$4.41 billion (NZ$4.78b) compared to the prior corresponding period.

Qantas says the group's full-year fuel cost was now expected to be $4.09b compared with $3.23b for the past financial year.

Other costs increased due to higher commissions paid to travel agents on the higher revenue and the impact of a weaker Australian dollar.

While air fares have nudged up over the last year, boosting revenue, the airline also maintained capacity discipline.

Total group capacity was down by 0.3 per cent, with decreases in both the international and domestic market.

Travel demand remained strong across business and leisure markets, and the resources sector continued to improve.

Structural changes to Qantas' international network continued to support revenue growth, including the Perth-London route, renewed codeshare agreements and traffic flows associated with refocusing on the Singapore hub.

"Market demand for travel remains fundamentally strong and we're seeing some wind-back of competitor capacity growth,'' said Qantas group chief executive Alan Joyce.

"When you look across our portfolio, we have a number of factors that help us manage cyclical headwinds impacting the sector. We have a leading position in the domestic market, structural advantages in our international businesses and diversified earnings from Loyalty.''

Based on the value of forward bookings - up 8 per cent on the previous period - and broader market conditions, the airline was confident in its ability to manage higher fuel costs and keep investing, he said.

The Qantas group is now fuel hedged 76 per cent of its requirement for this financial year and 39 per cent for the 2020 year, with the ability to benefit from significant price falls.

Group capacity for the first half of this financial year was now expected to be flat, with group domestic capacity expected to fall by approximately 0-1 per cent and group international capacity to be flat.

The group is on track to deliver at least $400 million in transformation benefits in the full year, with the majority of the cost improvements materialising in the second half.

The airline does not break out revenue performance of its operations such as Jetstar in New Zealand.

Qantas' announcement follows a strong Virgin Australia first quarter in which the airline's revenue grew by 9.7 per cent.

Virgin expects its underlying profit before tax to grow by more than 20 per cent for the first half to beyond $100m of the current financial year despite an $88m increase in fuel costs.

Qantas also announced today it would spend several million dollars on a new first class lounge at Singapore's Changi Airport and expand its existing business class lounge.

This would increase the airline's lounge capacity at Changi by 60 per cent when complete late next year. The upgrade reflected increased demand for premium travel and the importance of the Singapore hub to the group's broader network, the airline said.

Qantas retired another 747-400 last month, with the remaining nine to be steadily phased out by the end of 2020. Two additional 787-9s will be delivered in November 2018, taking its total Dreamliner fleet to eight.