Qantas Currently Holds 70% Of The Australian Domestic Market

A resurgent Qantas is quietly stamping its authority on the Australian market. The airline now commands a 70% domestic market share. That’s the result of a combination of internal and external factors, all skillfully parlayed by Australia’s national airline into its present powerful position. It’s undoubtedly good news for Qantas. Whether it’s in the long-term interests of the airline industry and the traveling public is another matter.

Qantas now commands a 70% domestic market share. Photo: Getty Images

There are many reasons to be optimistic says Qantas CEO

Many readers will see Qantas as a long-haul international airline. But short-haul domestic flying is the airline’s engine room and makes up the bulk of its revenues.

Over the last decade, Qantas’ domestic market share has hovered around the 60% mark. Included in that market share figure are domestic Jetstar and QantasLink operations. In 2007, Qantas’ domestic market share was around 63%. In the 12 months to June 30, 2016, it was down to 57%. Market share was back up to 63% in the 12 months to June 30, 2020. Now, domestic market share is up even more, bedding down at 70%.

“There are many reasons to be optimistic,” said an upbeat Qantas CEO, Alan Joyce, at an investor’s briefing last week. “Our (domestic) competitive position is likely to be the strongest in a decade, with about a 70% capacity share, the leading premium airline service and low-cost carrier in the market.”

While the domestic market in Australia is recovering, it’s still a way off from its 2019 highs. Nonetheless, Qantas expects its mainline domestic services to run at 80% of its 2019 levels this quarter and Jetstar domestic flying to approach 100% of 2019 levels.

“I think we’re getting a lot more confident. And I think more confidence is coming in every day as the risks are reducing,” Alan Joyce said.

“We’ve got Anzac Day, Easter, and the school holidays all lined up. On the basis that (local) borders remain open, and we don’t see further lockdowns, you can expect demand to build to that 80%.”

Despite posting a loss last week, Qantas CEO Alan Joyce struck an upbeat tone. Photo: Getty Images

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A combination of factors are boosting domestic business at Qantas

There is a combination of factors that benefits Qantas. Despite recently posting a multi-billion dollar half-yearly loss, the airline remains in a strong financial position with ample cash reserves.

They’ve got the money to bolster services. Qantas has also become more nimble. They’ve learned how to better take aircraft in and out of service as demand warrants. There’s also a management team installed in the Sydney HQ that doesn’t miss a beat (or an opportunity).

Over 2020, Qantas built up its intrastate, regional flights. It launched around two dozen new domestic routes. Local border restrictions are easing considerably and this time around, the restrictions look likely to stay eased. Meanwhile, its key competitor, Virgin Australia, was in the process of downsizing and very nearly went out of existence altogether.

“Virgin has shrunk considerably. Tiger’s gone,” said Qantas’ Andrew David at the briefing. Virgin Australia’s turmoil proved a boon for Qantas. Not only did they pick up corporate accounts and premium frequent flyers from Australia’s second airline, ad hoc leisure travelers moved across to either Qantas or Jetstar in droves. Virgin Australia’s troubles are a key reason why Qantas domestic is now so dominant.

Qantas expects domestic demand to reach 80% of 2019 levels soon. Photo: Getty Images

Is Qantas’ market dominance good for everyone else?

One of Qantas’ less publicly stated goals will be to lock in this market share and reap the rewards as capacity grows. You can’t blame Qantas for that.

Short-term, this isn’t a big issue for your average punter. There’s a nice price war on as all the players in the domestic market vie to get more people in the air. Those cheap fares are even extending into the premium cabins on some domestic airlines. But like or loathe Qantas, longer-term, this kind of market dominance isn’t ideal.

Once things recover fully, having an airline own 70% of the market isn’t good for passengers or the airline industry. It throws up barriers to and suppresses competition. For the traveling public, it’s likely to lead to higher fares down the track. It’s not a monopoly but it’s also not an open and competitive market.

Whether the other domestic airline industry players, Virgin Australia and Rex, can counter this dominance remains unknown. Right now, it seems unlikely.

Do you agree with this view? Is Qantas’ domestic market share pretty well locked in? Post a comment and let us know.