Virgin Australia's bullish medium-term expansion challenges Qantas, as Gulf carriers circle

Virgin Australia's fleet update, including an order for 23 Boeing 737 MAX 8s, shows that it remains bullish on medium-term growth prospects that will continue to challenge Qantas' historically strong position in the domestic Australian market, its foundation for profitability, as sixth freedom carrier expansion has decreased its international network.

Qantas has reported slowing yield growth in each of the four months since Virgin Australia launched business class across its network in Jan-2012, a trend CEO Alan Joyce expects to continue.

Virgin's early success in increasing corporate traffic, and no slowing of growth, means the carrier will soon need new strategic goals that will undoubtedly include a further slice of the lucrative corporate market. Further growth at Virgin will challenge Qantas' 65% market share and yield profile.

Meanwhile, a combination with either or both of Emirates and Qatar Airways may be what Qantas needs to jolt it out of the current despond.