Qantas and Virgin Australia reach an uneasy truce on domestic capacity expansion

Qantas and Virgin Australia appear to have reached an uneasy armistice in their domestic capacity war that added nearly 8% in seat capacity in the year to 30-Jun-2013. But a stay in hostilities is likely to be temporary at best, with neither side laying down arms.

Indeed, after Qantas offered an olive branch by stating it would limit its domestic capacity increases to between 1.5% and 2% for the first half of FY2014, Virgin Australia responded the next day by declaring it would grow capacity by up to double that amount. And that does not include any increase that its newly acquired 60% subsidiary Tigerair Australia may have planned.

Virgin Australia CEO John Borghetti also provocatively stated that Virgin Australia Regional Airlines, bolstered by the acquisition of Perth-based Skywest, will soon seek to break more Qantas monopoly routes, placing more pressure on fares and yields.