Faring badly: Qantas yield hurt in price war | smh.com.au
Qantas has suffered its first monthly decline in yields from both its domestic and international operations in more than two years, in a further sign of the impact of a fare war with Virgin Australia.
Australia’s largest airline today released its monthly traffic statistics, which showed that total yields for its domestic operations – including Jetstar and QantasLink – were up 4 per cent for the 11 months to May, compared with the same period last year. Yields for the group’s international business rose by 1.5 per cent over the same period.
But excluding Jetstar – which analysts today described as the ‘‘only shining light’’ – the group’s monthly traffic figures reveal the toll the battle with Virgin for passengers on domestic routes is having on the core driver of Qantas’s earnings.
‘‘We have seen three or four months of weakening domestic airfare trends [from Qantas]. But we would have expected more of the weakness to be in the international side of the business,’’ he said.
While international fares have remained relatively flat in recent months, Qantas fares for domestic flights have been trending downwards, reflecting a large increase in capacity by airlines.
The weakness in Qantas’s domestic operations is a concern because it is the core of its earnings.
Macquarie Equities’ aviation analyst, Russell Shaw, said in a note to clients today that there was likely to be ‘‘limited upside’’ to Qantas’s share price because of risks to earnings in 2012-13 from a substantial increase in capacity from airlines in the domestic market over the next six months.
‘‘As capacity is ramped up more aggressively by Qantas over the next six months on both the mainline and domestic front, it is hard to see the yield growth trend heading anywhere else but further south,’’ he said.