Capacity hikes backfire on Qantas

Capacity hikes backfire on Qantas
By admin

Domestic capacity increases are starting to take their toll on Australian airlines, with Qantas reporting a decline in yields in July.

Despite increasing seats by 5.8% in an ongoing struggle for market share with rival Virgin Australia, Qantas Domestic actually carried 40,000 passengers less than in July 2011, a 2.6% decrease. Passenger loads fell 4.3 percentage points to 77.7%.

Jetstar’s domestic services also saw loads drop 3.6 percentage points to 80.9% as the low cost carrier boosted capacity by 6%.

“Group domestic yields (comprising Qantas Domestic, QantasLink and Jetstar Domestic) were lower than the prior period due to increased capacity in the domestic market,” Qantas revealed in a statement to the ASX yesterday.

“In addition, both Qantas and Jetstar yields and loads in the prior period were favourably impacted by the grounding of Tiger Airways Australia.”

The airline said Qantas International yields had improved over the course of the month as it trimmed 7.8% of capacity by “exiting major loss making routes” in the second half of the last financial year, although loads still fell 2.1 percentage points to 82.7%.

However, a 26.4% increase to Jetstar International’s capacity saw its yields decline.

Meanwhile, Tiger chief executive Andrew David told the Australian Financial Review that Tiger too was feeling the impact of the capacity increases as it continues to recover from last year’s grounding.

“Qantas and Virgin and Jetstar have all added a lot of capacity at the same time, and as a result there’s an awful lot of capacity in the market and it affects everybody’s yield,” he said. “It puts pressure on the light at the end of the tunnel for us.”

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