Flight capacity throttling back: Joyce

Alan Joyce said there has been a "tapering off" of capacity in the domestic market over the past few months, but he conceded there is still some way to go before capacity reaches more rational levels, comments he made at CAPA's aviation conference in Sydney.

The article notes domestic capacity growth reached about 8% over the past year and has lessened recently, though Joyce said growth in flights remains too high in the market that generates the bulk of Qantas and Virgin's earnings—something investors should monitor as capacity cycles can affect margins and revenue.

Joyce said he was hopeful of a pick-up in demand after the election, noting the vote had dampened consumers' willingness to spend; a post-election recovery in demand could help airlines fill seats and improve domestic performance if it materialises.

Three days before Joyce's comments, Virgin Australia said it expected to lose up to $110 million this year, a point investors in the sector will find important when assessing industry health and competitive dynamics.

Joyce said Qantas would benefit from a fall in the value of the Australian dollar because a weaker dollar would reduce the incentive for foreign airlines to add more flights to Australia, potentially easing international competitive pressure.

The article reports Tigerair Australia plans to expand on domestic routes, prompting Jetstar to "protect its position" by increasing services; Joyce suggested that when capacity rationalises after such moves, the position for carriers and the market should improve.

Joyce cited big growth coming into certain markets, specifically flights to regional centres and leisure destinations, which are areas investors may want to watch for route-level demand trends.

Despite the talk of capacity easing, the article noted Cathay Pacific made clear it wants to expand services to Australia from 70 flights a week, a development that could influence international capacity dynamics.