He used to work for Qantas, that much is obvious:
Let capacity fall
Reducing capacity both reduces fuel costs and forces up average airfares. Fuel costs go down because fuel consumption falls and fuel consumption falls because it is positively linked to the number of seats that are flown.
Average airfares (not advertised ticket prices) go up because the same demand is squeezed into fewer seats, which means some people will be forced into higher price buckets. This raises average airfares.
Other variable costs also fall because most costs vary with the number of seats, and this is now lower.
A strategy of capacity reduction reduces costs by more than it cuts revenue, which results in more profit.
But reduce capacity to zero and the profit does not become infinite, alas.
All this might work in a monopoly or cosy duopoly. Unfortunately, it makes no sense in a voracious multi-player market as exists longhaul out of Australia. You just get eaten up and spat out.