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Virgin, Qantas cut seats in July, while Tiger, Jetstar continue capacity expansion

written by australianaviation.com.au | September 8, 2014
photo  - Seth Jaworski
Qantas and Virgin both cut domestic capacity in July. (Seth Jaworski)

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.

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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.

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“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.”

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3 Comments

  • Adrian Mealor

    says:

    Qantas need to bring forward not delay the delivery of its own boeing 787s. Maybe get at least 10 of them and just fly them on the main trunk routes between brisbane, sydney and melbourne. Fly an efficient aircraft, with business and Economy class..

    as for jetstar. Time to get serious. Why 10 daily flights between mel and syd and yet only 5 between syd and brisbane. As for the current reservation system. If u ask for flights between melbourne and cairns it only gives u direct flights and one via brisbane and one via sydney yet there are possible connections via newcastle, and gold coast.. give as many possible connections as possible.the gold coast could also be a hub for flights to queensland with connections via gold coast to sydney and melbourne.

  • Andrew

    says:

    I think youre right, Jetstar has route priorities in the wrong place all Jetstar capitol connect services ive been on were empty, while holiday routes are always full

  • Adam

    says:

    Lets face it, both VA and QF bled red ink their little tussle, but it was cute watching it play out hehe…but both now have realised war takes a big toll on everyone and there are no benefits, so a much more planned and market aligned approach to growth in the future will ensure success for both…the 787s are built for long haul ops, to put them on a MEL-SYD would just be an absolute abuse of that fine engineering, the 737 is fine for short trunk routes…you dont need a widebody for a 1 hr flight!

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