Qantas has claimed to be unconcerned by Virgin Australia’s proposed acquisition of a 60% stake in Tiger Australia, insisting its position is strong enough to withstand the deal's impact on the domestic market.
Speaking at a media briefing in Sydney, chief executive Alan Joyce expressed some scepticism that the deal would proceed. However, he maintained that if it were to do so, it would not compromise Qantas's position in the domestic marketplace, even if Tiger grows its fleet from 11 to 35 aircraft by 2018 as outlined.
"Jetstar has been unbelievably successful at the low cost end and the performance of Tiger clearly shows Jetstar significantly outperforming Tiger at the leisure end," he said. "Jetstar has a lower cost base than Tiger and is in a much stronger position."
Meanwhile, Joyce emphasised the group's overall strength in the domestic market, despite reporting underlying earnings before tax of $218 million – a sharp decrease from $328 million in the first half of 11/12. He attributed the weakened result to "elevated levels of capacity growth" in the market as the battle for market share raged during the first half.
"This has put pressure on yields for all airlines in the domestic market," he admitted. While that has now "rationalised", he predicted similar trends would be seen from time to time going forward.
But he stressed that, despite the capacity spike, the airline managed to maintain its 84% share of the corporate market, and continues to defend its 65% share of the domestic market.
At the moment, the group forecasts capacity growth of between 5% and 7% in the second half of the financial year.
"But we have complete flexibility to zero that capacity growth going forward or to grow it further if we need to in order to maintain that position," he said.
Meanwhile, Qantas will upgrade its entire A330 fleet from late next year with all to be reconfigured with lie flat seats in business class, “refreshed” economy cabin and new in flight entertainment.
The A330-300s, of which Qantas has 10, will operate between Australia and Asia while its fleet of 20 A330-200s will be deployed between the east coast and Perth. That will allow the final retire retirement of the group’s Boeing 767s by mid 2015.
In addition, the carrier will acquire five additional B737-800 aircraft for Qantas Domestic, to be delivered in 2014, and will extend the lease on two existing B737-800s this year.
“That leapfrogs anything our competitors are doing,” he said.
Joyce added: “The refurbished [A330] aircraft will give Qantas International a truly world class product in global aviation’s most dynamic and competitive market. Growing Asia is a major priority for the Qantas Group and this investment underpins our commitment to the region.”
