(Reuters) -Australia's Qantas Airways ( QUBSF ) on Friday cut its domestic unit revenue forecast for the first half of 2026 and flagged a slight rise in fuel costs, citing soft corporate travel demand, elevated refining margins and higher carbon compliance charges.

Qantas is now expecting an increase of about 3% in its domestic unit revenue for the first half, down from its prior forecast range of 3% to 5%.

The country's flag carrier said travel demand from the mining and resources sector remained robust, but broader corporate travel in Australia was recovering at a slower pace than previously expected.

Group capacity for the first half of 2026 is now expected to be "slightly lower than previously guided", due to delays in the return to service of its A380 fleet, the company flagged.

"We are adjusting domestic capacity in the second half to match the demand profile we are seeing," CEO Vanessa Hudson said in a separate statement.

Qantas said it is monitoring the ongoing U.S. government shutdown and working with partners to support affected customers, though no material impact on demand has been observed to date.

Fuel costs for the half are now forecast at A$2.62 billion ($1.70 billion), up from prior outlook of A$2.6 billion, reflecting elevated jet refining margins due to ongoing geopolitical volatility.

The revised figure includes around A$25 million in additional non-cash carbon costs tied to higher compliance obligations under the international CORSIA scheme.

($1 = 1.5389 Australian dollars)