Qantas cuts international services to grow profitable domestic market as Jetstar grows all around

Qantas is making significant competitive responses to invigorated challenger Virgin Australia's push in the lucrative Australian domestic market. Qantas will withdraw international routes and re-allocate aircraft primarily to the domestic market to keep the 65% market share it believes is optimal for overall performance. Additional network changes will right-size its fleet to demand while the company looks to shrink engineering facilities due to aircraft retirements. For its planned Asia-based premium carrier, Qantas will pursue a capital light option in which an airline partner - likely Malaysia Airlines (MAS) - shares part of the risk.

The story is more positive overall at the group's low-cost subsidiary Jetstar, which posted its largest-ever underlying profit. The carrier is benefitting from increased yields in Australia while its Singapore operation has held up profitably despite its competition, Tiger Airways, not being able to profitably absorb significant capacity increments.