Australia's Qantas Airways signalled changes to domestic capacity and fares on Thursday to counter surging fuel prices, saying that it expected strong demand for air travel, sending its shares up nearly 3%.

The Australian flag carrier lowered domestic flying levels for July and August from 107% of pre-COVID-19 levels to 103% but it did not provide further clarity on fares, adding that the adjustments were not expected to materially impact customers.

"In practical terms, these changes will generally lead to a higher seat factor on flights across the Group," Qantas said in a statement.

The airline said its international operations were seeing continued demand heading on to the northern summer period, as more governments remove pandemic-imposed travel restrictions.

International capacity climbed to over 70% of pre-pandemic levels by the end of the first quarter of fiscal year 2023, compared with 50% at the end of the previous quarter, Qantas said.

(Reporting by Riya Sharma in Bengaluru; Editing by Rashmi Aich)