(Adds background on Australia's economy, details)
Aug 22 (Reuters) - Australia's Qantas Airways Ltd QAN.AX said on Thursday its annual profit dropped 17%, missing analysts' estimates, hurt by higher fuel costs and a weaker Australian dollar.
The country's largest airline, like other carriers, is dealing with weaker travel demand as the Australian economy expands at its weakest pace since the global financial crisis, denting consumer and business confidence.
Higher fuel bills have also weighed on the airline industry's earnings. Fuel costs for Qantas rose by A$614 million to A$3.85 billion in the year.
Underlying pretax profit, the airline's most closely watched measure, came in at A$1.30 billion ($881.66 million) for the year ended June 30, down from A$1.57 billion a year earlier and missing an estimate of A$1.36 billion, according to Refinitiv data.
"Domestically, we're seeing weakness in the price sensitive leisure market but premium leisure demand is steady," said Chief Executive Officer Alan Joyce.
Qantas also said it would buy back shares worth A$400 million at its Wednesday's closing price of A$5.78 a share.
The airline, which is set to celebrate its 100th anniversary next year, declared a fully-franked final dividend of 13 Australian cents per share, up from 10 cents last year.
It reported record revenue of A$17.97 billion, a 5% increase from a year earlier.
For 2020, the airline said it would fully hedge its fuel bill that it expects to increase to A$3.95 billion. ($1 = 1.4745 Australian dollars)