QANTAS will increase its airfares by up to 3.5 per cent and suspend its share buyback program because of ongoing increases in the cost of jet fuel. 

But the national carrier says that, while the rise in fuel prices is a concern, it remains confident of meeting its guidance for a lift in 2007/08 pre-tax profit of at least 40 per cent, from the previous year's $1 billion result.

Domestic airfares will rise by about 3.5 per cent and international fares sold in Australia will increase by about 3 per cent, both from May 9.

A rise in fares sold outside Australia also is under consideration.

Qantas' low cost offshoot, Jetstar, is also reviewing its fares.

"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," Qantas chief executive Geoff Dixon said.

The news comes after world oil prices pushed higher over the weekend.

Mr Dixon said the group's fuel hedging program, its two brand strategy and efficiency gains from its sustainable future program had enabled it to manage higher fuel costs to date but that the continuing rise of jet fuel prices was of concern.

Qantas has hedged 34 per cent of its 2008/09 fuel needs at a price of $US90 per barrel, mostly for the first half of the fiscal year.

"But if high fuel prices persist beyond this point it would be of increasing concern," he said.

Qantas also said it had implemented a hiring freeze and cut back non-essential expenditure to minimise the impact of fuel prices.

Under the circumstances, Mr Dixon said, the group believed it was "prudent" to suspend its on-market share buyback program.

Qantas has bought back more than $500 million worth of shares since the program began last September.

Virgin Blue, in its profit warning earlier this month, said it would increase airfares by $10-$12 per sector from May 1 if fuel costs continued at high levels throughout April.

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