While domestic capacity discipline seems to be the order of the day at Qantas and Virgin Australia, it is a different story for the nation’s two low-cost carriers Tigerair and Jetstar.
Qantas’s latest traffic statistics indicate the Flying Kangaroo (including QantasLink) reduced domestic capacity, as measured by available seat kilometres (ASK) by 2.7 per cent in July, compared with the same month a year earlier.
ASKs calculate the total number of seats flown multiplied by the total number of kilometres flown.
The reduction in ASKs helped Qantas’s domestic operations (including QantasLink) lift load factors – an industry measure of how full planes are – by 0.7 percentage points to 76.7 per cent in July.
Macquarie Equities analyst Sam Dobson noted that domestic load factors across the Qantas group – Qantas, QantasLink and Jetstar – were up 0.7 percentage points in July despite Jetstar’s increase in capacity.
“While clearly there is some substitution occurring between Qantas Domestic and Jetstar, the resulting load factor growth for both carriers implies a positive yield trajectory,” Dobson wrote in a research note dated September 3.
Dobson said Qantas’s domestic load factor growth in July was the first time in 12 months the airline group had managed to increase load factors in the past 12 months.
“With capacity growth expected to moderate further we expect a continuation of these positive initial signs,” Dobson said.
Qantas has said it will have flat capacity across its two domestic brands during the first half of 2014/15 and has guided the market to an underlying profit before tax for the six months to December 31, 2014.
It was a similar capacity story at Virgin Australia, where domestic ASKs fell by 0.9 per cent compared with the prior corresponding period.
However, Virgin’s load factor dropped 0.6 percentage points to 79.6 per cent, while the airline said yields – or average fares per passenger – were flat in July compared with the prior corresponding period.
Australia’s second largest airline group did not offer capacity or profit guidance at its 2013/14 full year results presentation.
At the leisure end of the market, Tigerair, which is 60 per cent owned by Virgin, and the Qantas-owned Jetstar have continued to pour additional seats into the local market.
Tigerair’s ASKs rose 13.6 per cent in July, while Jetstar increased capacity by 4.7 per cent in the month.
Jetstar is almost four times larger than Tigerair, based on ASKs flown in July.
Aviation consultancy CAPA – Centre for Aviation said Tigerair was unlikely to add any new aircraft to its fleet of 13 Airbus A320s until the market was ready.
“The cautious approach to expansion is sensible given current market conditions in Australia,” CAPA said in a research note dated September 5.
“Domestic expansion at this point would almost certainly be profitless for Tigerair Australia.”