Qantas Domestic Yields Still Falling
3rd Sep 2014
The embattled state carrier has reported a discouraging figure on last week, indicating its domestic yields (read: returns on fares) have continued its downward trend in July this year compared to the same period last year.
Qantas has increased its domestic airfares to offset what would have been a costly expansion of capacity in most domestic routes sans the actual demand. For the past two years, the airline engaged in a battle royale with Virgin Australia, its arch nemesis, by flooding the domestic market with more seats each way, resulting to oversupply of seats than the demand warranted it.
The carrier reported, though, that its load factor posted a slight yet negligible growth during the month of July.
Its international operations, however, painted a different picture as its yields reportedly went up during the period on most routes as foreign-based carriers tempered their capacity expansion to Australia.
Qantas has announced recently that it will momentarily cease expanding capacity in the domestic sector until the end of this year. It also said that the growth would certainly vary across its brands.
In July, the carrier downgraded capacity in its mainline domestic operations by 2.7% while, at the same time, upgraded the domestic capacity of its low-cost subsidiary, Jetstar, by 4.7%. The difference, therefore, made Qantas group increase its capacity by 2.1% during the period and registered a 1% rise in load factor to 81%.
The airline lost steam in its battle with archrival, Virgin Australia, when it announced last May that it would stop expanding capacity within the second half of 2014. During their two-year capacity war, both airlines upstaged each other by supplying the market with extra seats that resulted to oversupply of capacity.
The airline CEO, Alan Joyce, had warned that any increase in airfares by the airline would take time as poor demand is seen to persist in foreseeable future.
Despite this unfavorable scenario, Qantas is expecting to make a profit in the first half of the current fiscal year. However, that would only happen if they implement a major cost-cutting measure across its operations.
The airline also disclosed last week during its monthly report that foreign investors now hold 43.7% of its total stake.