Cheap airfares 'likely to continue' despite Qantas cuts

Cheap airfares of the past decade and plenty of seat capacity are set to continue.
Cheap airfares of the past decade and plenty of seat capacity are set to continue. Photo: Joe Armao

Qantas passengers are likely to avoid any major turbulence as a result of the airline axing 1000 jobs and warning of a $300 million loss in the first half of next year.

According to an industry expert, cheap airfares of the past decade and plenty of seat capacity are set to continue. ''The only way passengers will suffer is if Qantas reduces that capacity [supply of seats] and that is highly unlikely,'' said Dr Tony Webber, a former Qantas chief economist.

''Reducing capacity would force airfares up, but I can't see it happening because Qantas is trying to hold on to its 65 per cent [domestic] market share.

''They haven't mentioned cutting capacity at all,'' he said.

Dr Webber, now an associate professor at the University of Sydney Business School and managing director of Webber Quantitative Consulting, said that in a worst-case scenario if seat capacity was cut it would be on under-performing routes.

Domestically, those routes may include Darwin and Adelaide, and internationally the key New Zealand cities of Christchurch and Wellington.

''There isn't much left to cut of the international routes because they are already down to bare bones,'' Dr Webber said. ''They certainly wouldn't touch the US or European routes.''

Dr Webber said passengers had enjoyed low airfares for more than 10 years. ''If you look at the international and domestic market over the past decade, the basic airfares haven't changed much and I don't think they will as a result of this.''

But he said airfares were ''too low''. ''When there are too many seats out there and supply exceeds demand you will get airfares falling or staying at the same level, however costs go up and margins fall. That is what is happening to Qantas. They can only stop discounting if they pull capacity out, but that is the last thing they want to do.''

He said the airline has an unflinching pursuit of market share.

Dr Webber said Qantas ''needs'' a price hike of about 10 to 15 per cent over four years.

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