Qantas Airways's (ASX:QAN) Jetstar Australia's baggage policy change is expected to be beneficial to revenues and earnings, Jefferies said in a Wednesday note.

Jetstar Australia said all passengers will need to purchase overhead luggage space, but can still bring one under-seat personal item up to 10 kilograms. The change to baggage allowances from February 2027 is a significant industry change and will have broader implications.

The most obvious benefit is higher ancillary revenue, as many passengers require some luggage in addition to under-seat carry-on.

This will make Jetstar's domestic boarding process easier and faster, and also compress the difference in base fares between Jetstar and Virgin Australia for passengers travelling with some overhead luggage.

The investment firm retained its buy rating on Qantas with a price target of AU$11.91 per share.