Qantas Airways has overhauled its strategy of putting more planes in the sky to fend off competition from Virgin Australia, which has contributed to widening losses at both airlines.
Qantas said it no longer plans to add capacity on domestic routes in the July-September period, effectively offering a truce to Virgin in a prolonged and costly battle for customers that has led to an oversupply of air tickets at discounted prices, reported Dow Jones Newswires.
"Its a pretty clear example of signaling to Virgin," said Oliver Lamb, director of Sydney-based Pacific Aviation Consulting. "If Virgin takes the bait then sure, it could well signal an easing of the capacity war."
Once one of Asias most profitable airlines, Qantas is struggling to stem losses caused by high jet-fuel costs, sluggish international demand and intensifying competition for lucrative business travellers.
Qantas has already laid off thousands of workers, suspended nearly a dozen aircraft orders and sold assets including Australian airport terminals.
Despite those challenges, Qantas has long resisted giving up any of its 65 percent share of the domestic market, setting the stage for its bruising battle with Virgin. Qantas management have said this dominance allows it to maximise profits by providing customers with more destinations and travel times.
Virgin – backed by three major state-owned shareholders in Air New Zealand, Singapore Airlines and Abu Dhabis Etihad Airways – has used tactics including the introduction of business-class seats on its planes to lure customers away from Qantas. It has also added flights to Perth and smaller towns in the countrys resource-rich western regions, where thousands of people fly in and out each week to work on mines or multibillion-dollar gas projects.
Qantas responded by adding capacity of its own, leading to a glut of seats and forcing both airlines to discount prices.
On Wednesday, Qantas called a temporary halt to that strategy for the three months starting July 1. "Qantas will continue to monitor and adjust capacity according to changes in market conditions during this period," the airline said.
Virgin, led by former Qantas executive John Borghetti, was noncommittal in its response to Qantass new capacity plans.
