(Reuters) -Qantas Airways Ltd forecast a record annual profit on Tuesday and increased its share buyback by up to A$100 million ($67.83 million), underpinned by improved travel demand and a moderation in fuel oil prices.

Australia's flagship carrier expects an underlying profit before tax of A$2.43 billion to A$2.48 billion for fiscal 2023, slightly higher than a Refinitiv estimate of A$2.40 billion.

The forecast profit is nearly A$850 million higher than the 2018 record of A$1.60 billion.

"Overall, this is a positive trading update. The strong trading conditions seen in 1H23 have continued throughout 2H23, driving an earnings and cash flow beat versus expectations," UBS analysts wrote in a note.

Shares of Qantas, however, were down 1.9% at A$6.38, compared with a 0.3% gain in the benchmark stock index.

Airlines across the globe have seen a sharp turnaround from the coronavirus crisis as strong travel demand after years of pandemic restrictions led to sky-high fares.

"We're able to put some of the spare aircraft and crew we kept in reserve back in the schedule. That's combining with lower fuel prices to help put downward pressure on fares," CEO Alan Joyce said.

Flying activity has increased in the second half as new aircraft arrive, more wide-body jets return from long-term storage and operational reliability improves, Qantas said.

Jet fuel prices remain elevated but recent falls will deliver a cost improvement in the second half, it added.

Qantas expects its domestic capacity to reach above pre-COVID levels by the end of the second half and international capacity to grow to more than 80% of pre-pandemic levels.

Net debt is now expected to be between A$2.70 billion and $2.90 billion at June-end, significantly below a revised target range of A$3.70 billion to A$4.60 million.

($1 = 1.4743 Australian dollars)

(Reporting by Harish Sridharan and Himanshi Akhand in Bengaluru; Editing by Anil D'Silva and Subhranshu Sahu)