Qantas expects no let-up in travel demand as the airline reports record profits on the back of high fares and a booming domestic market.

In a statement to the ASX on Tuesday, the national carrier said it expected to post a record underlying profit of up to $2.48 billion this financial year.

The forecast is close to $1 billion more than Qantas’s previous record profit, in 2018. It also comes after it revealed in February a record pre-tax profit of $1.43 billion for the first half of the financial year.

On Tuesday, the airline said yields would remain materially above pre-COVID levels through 2023/24, particularly for international flights, but fares were gradually dropping as the industry added capacity.

Bookings indicated strong travel demand would continue, it said. Revenue was at 118 per cent of Qantas’s pre-pandemic levels for domestic flights and 123 per cent for international journeys.

Qantas said that by the end of the year it would be operating slightly more domestic flights than before the pandemic, led by a significant increase in its key routes between Melbourne, Sydney and Brisbane.

The airline’s international capacity is at 84 per cent of pre-COVID levels and will reach 100 per cent by March.

In its quarterly market update on Tuesday, the Qantas said it expected to make a 2022/23 underlying profit before tax of between $2.425 billion and $2.475 billion, significantly outstripping previous records but broadly in line with guidance and consensus expectations.

An A380 Qantas mothballed at Victorville Airport in California’s Mojave desert will return to service by year-end after maintenance and cabin modifications, while two Airbus A330s will be leased from Finnair.

Finland’s flag carrier will operate the routes on Qantas’ behalf from October until late 2025 between Sydney and Singapore and, from late March, from Sydney and Bangkok.

“More parts of the aviation supply chain are returning to normal, which means we’re able to put some of the spare aircraft and crew we kept in reserve back in the schedule,” chief executive Alan Joyce said.

“That’s combining with lower fuel prices to help put downward pressure on fares, which is good news for customers.”

Qantas said its $500 million share buy-back announced in February was three-quarters complete. It will also spend a further $100 million on the program.

Including that additional buyback, Qantas expects to end the financial year on June 30 with a net debt of between $2.7 billion and $2.9 billion, down from a peak of $6.4 billion at the height of the pandemic.

RBC Capital Markets analyst Owen Birrell noted that the $100 million “token lift” in the share buyback program paled in comparison with the $1.4 billion gap between Qantas’s expected year-end net debt and its target range of $3.7 billion to $4.6 billion.

He said it raised the question of whether there would be a major step-up in Qantas’s investment in its fleet.

-with AAP