Common sense returning? One can only hope.

[Capt NG]

Qantas' 65 per cent line in the sand on market share seems to have been washed away by the tide of red ink.
Many will deride Qantas boss Alan Joyce for capitulating on his dogged adherence to 65 per cent market share to achieve this ''optimum'' frequency network advantage, but they won't be Qantas shareholders.
The capacity war that has resulted from maintaining 65 per cent (or close to it) has cost the airline dearly. It was a war that Qantas could ill afford.
The airline is already sustaining heavy losses from its international division, thanks in part to an influx of competition from foreign airlines and strategic mis-steps.
It is not the time to engage in a costly war on the domestic front. While there is sympathy for the notion of aspiring to a particular market share, the trade-off has been trashing domestic yields.
Qantas is holding to the notion that it has to retain sufficient market share to get the frequency advantage to retain its competitive edge, but now concedes that 65 per cent is more indicative. It is not line-in-the-sand - rather more of a wave than linear.
It's a change in rhetoric that Qantas now says it has been putting out there for about six months in subtle ways rather than advertising the softening of its market share stance.
Perhaps it was too subtle. A search of the Fairfax Media database (which includes News Ltd media also) brings up 129 mentions of Qantas and the 65 per cent line in the sand. None of these were challenged by Qantas.
As recently as its last annual results announcement in August 2013 Joyce said, ''we are focused on maximising our 65 per cent capacity position'' and, ''In the domestic market, Qantas and Jetstar retained the group's profit-maximising 65 per cent share.''
Indeed the news on Wednesday that it would not add any new capacity in the first three months of the new financial year - where it was previously planning growth of 2.5 per cent - was tucked away in a few paragraphs at the end of its monthly traffic statistics.
Qantas defends this obscure treatment saying capacity changes are not big news. Most would beg to differ given the company has been embroiled in a financially crippling capacity war for 18 months.
Is waving the white flag big news? Sure is.
The message from Qantas is that it was a response to a soft economy, a sluggish aviation market and an abundance of supply.
In a memo to its staff on Wednesday, Qantas said, ''We'll use smaller aircraft on some routes and cut growth in non-peak frequencies where appropriate. However, it's important to emphasise that this is a reduction in planned capacity growth - not a reduction in the overall capacity we have now''.
It went on to say the changes ''will be spread across the domestic network and different airlines''.
''We will continue to manage our capacity to reflect the trends we see in the broader market and in response to our customers' needs,'' the memo said.
The cynics will wonder if Joyce is also offering some positive news to cushion investors against what may be a poorer than expected result for the full year. The market is already expecting losses of around half a billion for the current financial year.
Qantas is one stock some investment banks have suggested could disappoint in 2014.
But it takes two to make a cease-fire. Virgin has always been very coy about its capacity plans and chose to stick with this policy on Wednesday.
However, it's probably a fair bet that it is enduring the negative effects of the capacity war as much as Qantas. I imagine Virgin boss John Borghetti will be more than willing to accept the olive branch being presented by Joyce.
In theory the two-airline market should now see some more rational pricing. But as Qantas admits, the aviation market is not particularly strong right now. Any changes could take many months to filter down to the earnings line.


Read more: http://www.smh.com.au/business/a-war-th ... z32REBMDNJ

[_BlackHawk_]

Good decision. The only way to force prices up again is to restrict supply. Now all we need to do is get rid of that ridiculous carbon dioxide tax and that will save the airline another 120 million dollars a year. Mind you, QANTAS should never have been privatised in the first place.

[Capt NG]

It comes down to sustainability... QF was seat dumping to put Virgin out of business basically, and it's backfired and hurt the entire industry.. If prices have to go up then so be it.. What does Australia want? One airline to monopolise the market..or two major carriers able to service the needs more broadly in so many ways? Whether that be via their full service arm coupled with the low cost arm, coupled with the charter and mining arm, coupled with the regional arm? Market share does not equate to profitability...the only airline CEO in this country that realises this is Borghetti.

[tor lives]

Yep....this ridiculous capacity war has claimed way to many victims, (including profitability, public image, industry/professional credibility, organisational stability, share price, yield, credit rating, and thousands of jobs....including mine!!!). It should have never gotten to this and both carriers bear equal responsibility and should be held equally accountable for the consequences of this madness. Did our local industry learn nothing from similar overseas experiences???. There was a time when two major Australian carriers comfortably and profitably co-existed with approx 50% of the market each...the same situation could prevail again if common sense returns and things are managed well in the two major camps.
The irony of all this is that it has never been cheaper to fly, while at the same time it has never been more expensive to provide the service.....that's just not a mid-to-long term viable proposition for any business.
Ray