(Reuters) -Qantas Airways reported a 16% decline in annual underlying profit on Thursday, impacted by rising fuel costs and lower fares, even as Australia's flagship carrier announced an additional share buyback plan of up to A$400 million ($271.36 million).

Rising fuel prices and a return to normal travel capacity have led to lower fares, as passengers search for more budget-friendly travel options, which has affected Qantas' profitability.

Overall, earnings declined year-over-year due to normalized fare prices, increased investments in customer-focused promotions, and a drop in freight income, particularly during the first six months of the year.

The airline's underlying profit before tax fell 16% from the prior year to A$2.08 billion for fiscal year ended June 30, in line with a Visible Alpha consensus of A$2.08 billion.

On a statutory basis, profit after tax attributable decreased by 28.1% from the prior year to A$1.25 billion.

Qantas did not declare a final dividend, continuing its five-year dividend drought that began in 2019.

However, the company announced an A$400 million share buyback program to distribute excess capital, citing the fulfilment of all criteria within its financial framework.

($1 = 1.4741 Australian dollars)

(Reporting by Roushni Nair and Sameer Manekar in Bengaluru; Editing by Tasim Zahid and Arun Koyyur)