Qantas cuts domestic flights and ups fares as fuel price soars

Soaring fuel prices have prompted Qantas to take the bold step of reducing domestic capacity in a move that is likely to mean higher fares and fuller flights.

Rivals Virgin Australia and Qantas are seeing strong demand for domestic services in coming months. Picture: Brenton Edwards / NCA NewsWire

Soaring fuel prices have prompted Qantas to take the bold step of reducing domestic capacity in a move that is likely to mean higher fares and fuller flights.

An industry update issued by the airline on Thursday revealed that domestic travel was performing well with strong demand across the business, leisure and corporate sectors.

But increased fuel prices had prompted Qantas and low-cost partner Jetstar to “rebalance capacity and fares in response”.

“The cuts to domestic flying levels for July and August are being deepened with capacity moving from 107 per cent of pre-Covid levels to 103 per cent,” said the update.

“In practical terms, these changes will generally lead to a higher seat factor on flights across the group.”

International Air Transport Association data showed the cost of fuel in the Asia-Pacific was now almost double that of a year ago at $157 a barrel.

CAPA Centre for Aviation chairman emeritus Peter Harbison said that had left airlines with few options to try to preserve their bottom line.

“An obvious one is to raise fares – and that must happen, whether through ‘fuel surcharges’, or simply raising the actual seat price,” Mr Harbison said.

“Another is to reduce capacity flown. This is always considered a risky tactic in a market share-driven marketplace.”

Qantas’s capacity reductions seemed at odds with commentary by CEO Alan Joyce this week after announcing the purchase of a controlling stake in online travel business TripADeal.

He said demand for travel was “massive” as people made up for lost time over the last two years. “We are in a position where domestic leisure demand is well above 120 per cent of pre-Covid levels so that demand we think will also continue going forward,” Mr Joyce said.

Virgin Australia CEO Jayne Hrdlicka also spoke of the strong uptake of domestic travel on Tuesday, describing demand as “very high”.

“We’re really enjoying the opportunity to reconnect Australians,” Ms Hrdlicka said.

She was more guarded, however, on whether Virgin was maintaining the 33 per cent market share it had targeted and even managed to exceed in January.

“Circumstances change month by month. Depending on the month we’re at 33 per cent and we’ve got more aircraft coming so we’re confident that even as other carriers grow, we’ll be able to secure 33 per cent of the market,” Ms Hrdlicka said.

On the international front, Qantas was planning for capacity to climb to about 70 per cent of pre-pandemic levels by the end of September. Flights from Perth to London resumed this week after operating through Darwin since November last year, and Qantas was preparing to re-route its QF1 flight to London through Singapore from June 19, and switch from a Boeing 787 back to an A380.

A third A380 is also due to come out of storage and return to service from June 6 on the Melbourne-Los Angeles route.

Trans-Tasman flights are ramping up significantly in response to the relaxation of New Zealand border restrictions, and flights to Japan will resume out of Cairns from July 20 with Jetstar, and on September 12 from Sydney with Qantas.

Jetstar flights to Bali are expected to be back to near pre-pandemic capacity by the end of June, operating from seven Australian cities due to high demand.

Frequency is also set to increase on Qantas’s Sydney-Manila route to daily services from mid-September, and flights to Santiago will resume from Sydney on October 30.

Direct flights to San Francisco, however, have been pushed back from July 30 to October 30, but Qantas remains committed to the commencement of Perth-Rome services on June 22, Sydney to Bangalore on September 14 and Dallas Fort Worth from December 2.

Jetstar’s Sydney-Seoul service is locked in for a November 2 kick-off, followed by Qantas from December 10.

Mr Joyce said the demand Qantas was seeing for places like Los Angeles, Britain, Bali and South Africa exceeded 2019 levels. “We’re seeing massive growth in bookings, massive growth in planning and massive growth in travel,” he said.

“Australians are making up for lost time and they are travelling the globe again.”

Originally published as Qantas cuts domestic flights and ups fares as fuel price soars