Qantas says its market share war will continue, adding that the carbon tax is one of the most significant challenges it faces after four business groups urged repeal of the tax.
Qantas chief executive officer Alan Joyce says he will maintain his strategy of holding 65% of Australia's domestic air travel market despite criticism the capacity war is damaging the airline.
Mr Joyce blamed rival Virgin Australia for the glut of cheap seats in Australia, saying that in absolute seat terms Virgin had added more and that it was wrong to simplify his strategy as adding two aircraft for every one added by his competitor.
"The reality that we've had is that our competitor has added, in the last two and a half years, 18% capacity growth and Qantas has added half that," Mr Joyce said at an Australia-Israel Chamber of Commerce lunch in Sydney.
"And they are losing money. Proportionally they are losing more money than Qantas is."
Analysts have pointed to the damaging capacity war, which has forced airfares down, as a reason for Qantas's financial woes.
Mr Joyce said he would not change his strategy because premium business customers wanted the regularity of flights now on offer and could switch airlines if any aspect of Qantas's offering was beaten.
"We have to make sure that we are competitive in every single space," he said.
"If we pulled back 10 per cent do you think our competitor, seeing that, wouldn't add 10% in?"
Mr Joyce, who was questioned by journalist Ross Greenwood during the lunchtime interview, also said he had the full support of the Qantas board and that he enjoyed a good relationship with the federal government.
He insisted he was not surprised by the federal government's decision to refuse a debt guarantee for Qantas.
Mr Joyce also said Qantas staff understood the tough decisions he had to make to make Qantas viable, including plans to sack 5,000 workers.
"I've been getting lots of emails from staff saying they understand this is not easy, it's tough, they understand that 5,000 jobs is a lot and it's hard to do," he said.
The push comes as The Australian reports Qantas' carbon tax liability was on track to reach $118 million this year.
According to the newspaper, the airline said the carbon tax was "among the most significant challenges we face" but that it was not able to pass on the cost to consumers because of the "intensely competitive market".
Business groups urge carbon tax repeal
Four key business groups have called on senators to swiftly repeal the carbon tax, as embattled national carrier Qantas Airways reveals the impact the legislation was having on its bottom line.
The Australian Chamber of Commerce and Industry, Australian Industry Group, Business Council and Minerals Council released a joint statement on Wednesday urging the Senate to pass the Abbott government's package of bills.
They said the carbon tax was making key industries less competitive every day it remained in place.
"Most businesses have been unable to pass their carbon tax-related costs on to customers," the groups' chief executives said.
"For small business especially, this has been a major burden that has reduced profitability, suppressed employment and added to already difficult conditions."
The chiefs said Labor and the coalition had gone to the 2013 election pledging to terminate the carbon tax.
While they acknowledged crossbench senators taking their seats in July had pledged to back the repeal, acting immediately would boost business confidence and cut power bills.