Qantas boss Alan Joyce says Australia still only has room for two major airline groups and it is unlikely both Virgin Australia and new rival Regional Express (Rex) will survive the post-pandemic aviation dogfight.
Mr Joyce said in an interview on Wednesday that country airline Rex launching flights between Sydney and Melbourne in March would spark fierce competition on the busy route.
Rex will start Sydney-Melbourne services in March. Credit: Robert Pearce
"My personal view is that this market has never sustained three airline groups and it probably won’t into the future," he told an online event hosted by Reuters.
"You can be guaranteed that Qantas will be one of them – it’s who else is going to be in the market place post this and into the future is going to be interesting."
Rex's move to start jet aircraft services between capital cities is the biggest shake-up of the aviation market in decades. It currently flies to 59 regional and remote destinations around Australia.
It plans to have a fleet of up to 10 Boeing 737s in the skies by the end of this year.
Mr Joyce also told the event that the Sydney coronavirus outbreak in December and resulting state border closures set back his airline's recovery from the pandemic by three months.
Qantas had earlier predicted its domestic flying capacity would return to 80 per cent of pre-COVID levels in the first three months of 2021 but Mr Joyce said it would now be stuck at 60 per cent before reaching 80 per cent by mid-year.
He said the outlook was still "volatile" with Victoria and Queensland still closed to travellers from Sydney, however there had been very strong demand leading up to December when state borders were mostly open.
Mr Joyce said he expected Qantas and its budget arm to grow its domestic market share from 60 per cent to 70 per cent after Virgin trimmed down its fleet and shut TigerAir following its bankruptcy and takeover by US private equity firm Bain Capital last year.
While Virgin had ceded ground in the corporate travel market, he said there would be a fierce battle for SME and leisure travellers.
Qantas last week reopened bookings on most of its international network from July 1 in the belief that the roll out of vaccines would make it possible for people to travel overseas again.
However on Wednesday Mr Joyce echoed the views of a leading epidemiologist that herd immunity would need to be achieved in Australia before the country re-opens its borders. The federal government does not expect to complete its vaccine rollout until October.