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Qantas flags flat capacity growth ahead

written by australianaviation.com.au | May 21, 2014
Qantas is putting the brakes on domestic capacity growth. (Seth Jaworski)
Qantas is putting the brakes on domestic capacity growth. (Seth Jaworski)

Qantas has flagged zero domestic growth across both its mainline and Jetstar operations in the first three months of the new financial year in response to market conditions.

Australia’s largest carrier, which has waged a fierce battle in the domestic market with Virgin Australia, made the announcement in its monthly traffic statistics released on Wednesday.

“In response to changing conditions in the domestic market, the Qantas Group has revised planned capacity additions in the first three months of financial year 2015,” Qantas said.

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“As a result of these changes, total domestic capacity growth (comprising Qantas Domestic, QantasLink and Jetstar Domestic) will be zero in each of the first three months of financial year 2015 compared to the prior corresponding period.”

Macquarie Securities analyst Sam Dobson said the move to freeze capacity growth suggested the “capacity war is over … pending VAH’s response”.

“Slower capacity growth should be positive for yields in the medium term, with the cost-out story at QAN increasing momentum,” Dobson wrote in a research note.

Qantas chief executive Alan Joyce said recently the 65 per cent market share target had been misinterpreted by the market.

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“We have never been focussed on … our issue has never been … I think people have misinterpreted where we were with the 65 per cent market share,” Joyce told the Macquarie conference on May 8.

“We are focussed on making sure Qantas has the frequency and network advantage over Virgin which allows us to maintain our corporate market share advantage that we have.

“We want to try and maintain that as it is one of the product features that keeps the corporate market with Qantas.”

Qantas domestic passenger numbers, including QantasLink, fell 3.2 per cent in April, compared with the prior corresponding period.

Passenger numbers fell 1.5 per cent across the airline group – comprising the international and domestic operations of both Qantas and Jetstar – in April.

Moreover, Qantas said yields – an industry measure of average airfares per passenger – for the financial year to date were lower than the prior year due to “continued market capacity growth and weak demand”.

Qantas reported a $235 million loss for the six months to December 31 2013, and has announced plans to cut 5000 jobs, defer aircraft orders and drop underperforming routes in a bid to return to profitability.

Speaking at the opening of the airline’s airport lounge in Sydney, Etihad Airways chief executive James Hogan said capacity adjustments were taking place across the aviation landscape as carriers reacted to market conditions.

“We are seeing markets correcting,” Hogan told reporters.

“It is a cyclical business and when you go through tough times you have to adjust.”

Etihad owns a little over 20 per cent of Virgin Australia.

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5 Comments

  • John

    says:

    Finally Qantas see sense, what Qantas need is a 65% frequency share to compete with Virgin Australia, not a 65% capacity share.

  • Jed

    says:

    A sign of the pressure getting to Joyce perhaps?

  • Glen

    says:

    It looks to me like they using this as a excuse to get more help from the goverment if they keep saying that things are getting worse for them, then maybe the the cheque book will come out. I still don’t understand why Qantas is competing against itself ,why not just have Jetstar run all the domestic flights and QANTAS stick to international flights.

  • Stuart Lawrence

    says:

    I agree with the above comment as Glen says. What about this Jet star flies all of the New Zealand and New Cladeonia and Bali Indonesia flights and Leave Qantas to do the rest. ALso Qantas flies to some cities overseas in North America China Europe on a seasonal basis.

  • John Reid

    says:

    If Qantas want to/need to “maintain our corporate market share advantage” as stated by AJ above, they certainly cannot abdicate their domestic full-service flights to leave only Jetstar. However, I’d really like to see some Jetstar services in Canberra – we have neither “budget” carrier here.

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