The capacity war has Virgin caught in a tailspin

Chief executive John Borghetti has turned Virgin Australia into a viable alternative to Qantas, but its increasing cost base and big international losses will be unsustainable in the long term.

The bill for last year’s airline capacity war is now in and, depending on how you look at it, amounts to either $3.2 billion or a bit over $1bn. Either way, it illustrates how senseless and destructive the war between the two domestic duopolists has been.

Within 24 hours of Qantas’ headline loss of $2.8bn ($646m on an underlying basis), Virgin Australia has now checked in with a $484m headline pre-tax loss, or about $427m if non-cash impairments are stripped out.

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