Qantas banking on a rise in domestic demand after election
Mr Joyce also said he was hopeful of a rise in demand for air travel after the election, the lead-up to which had dampened consumers' willingness to spend. His comments come after Virgin Australia warned it expected to post a loss of up to $110 million this year. The carbon tax and a new reservations system eroded Virgin's earnings.
Mr Joyce said capacity in the domestic market had lessened after growth reached about 8 per cent over the last year. But he said the level of growth in flights remained too high in a market in which both Qantas and Virgin derive the bulk of their earnings.
"Overall there is still big growth coming into certain markets," he said, citing flying to regional centres and leisure destinations.
Mr Joyce pointed to Tigerair Australia's plans to expand services on domestic routes, which would result in Jetstar "protecting its position" by increasing services.
"[But] when capacity rationalises the position for everybody I think should improve," he said at CAPA's aviation conference in Sydney. "The capacity in the Australian domestic market has gone through these cycles before. It is a very competitive market."
Mr Joyce said Qantas would benefit overall from a fall in the value of the dollar, partly because it would reduce the incentive for foreign airlines to put on more flights on routes to Australia.
Foreign airlines have benefited from selling tickets in Australia because of the higher gains made when they exchange revenue generated here into other currencies.
However, Cathay Pacific made clear on Thursday that it wants to expand services to Australia. But it needs the Australian and Hong Kong governments to agree to lift a cap on the number of flights.
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Alan Joyce said there has been a "tapering off" of capacity in the domestic market in recent months, but he believes there is still some way to go before capacity reaches more rational levels. He noted domestic growth had reached about 8% over the last year and called the market "very competitive."
Joyce said the lead-up to the election had dampened consumers' willingness to spend, and he is hopeful demand for air travel will rise after the election. For investors, this suggests near-term weakness tied to consumer sentiment could improve if post-election demand returns.
Virgin Australia warned it expected to post a loss of up to $110 million for the year. The company said the carbon tax and a new reservations system had eroded its earnings, highlighting cost and operational pressures in the domestic market.
The article says Tigerair Australia plans to expand services on domestic routes, and Jetstar is increasing services to protect its position. Those moves add capacity, and Qantas expects that when capacity "rationalises" it should improve conditions for all carriers.
Joyce said Qantas would benefit overall from a weaker dollar because it reduces the incentive for foreign airlines to put on more flights to Australia. Foreign carriers have been advantaged when exchanging Australian ticket revenue into other currencies, so a lower dollar could blunt that benefit.
Cathay Pacific stated it wants to expand services to Australia, but it needs the Australian and Hong Kong governments to agree to lift a cap on the number of flights before it can do so.
According to Joyce, capacity rationalisation means reducing oversupply on routes; when that happens the competitive position for airlines should improve. For investors, this generally implies potential for better yields and margins if airlines stop adding excess capacity and demand remains stable.
Joyce pointed to growth coming into certain markets, specifically flying to regional centres and leisure destinations, as areas showing significant expansion.
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