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Qantas: Alan Joyce thinks either REX or Virgin Australia will not survive

Qantas: Alan Joyce thinks either REX or Virgin Australia will not survive

At a Reuters Next online event on 13 January, in an interview with journalist Jamie Freed, Alan Joyce explained his views on the coming competitive battle between Qantas (including Jetstar) REX and Virgin Australia for a share of the domestic market:

“My personal view is that this market has never sustained three airline groups and it probably won’t into the future”

Alan Joyce, Reuters Next, January 13 2021

Background

History supports his view, however, a lot has changed in the 20 years since the then ‘Virgin Blue’ entered the market. For a start, the market has grown considerably, airlines have risen and fallen, gone out of business and been bought and sold. Maybe 2021 is the time for a third competitor.

Joyce is predicting fierce competition come March when REX launches its Melbourne/Sydney route, with only two of the competitors surviving. He definitely sees Qantas (and by implication Jetstar) as one of the winners.

The last capacity war – between Qantas and Virgin Australia ended in a draw, with the airlines agreeing to end the price cutting in order to survive. It is true that Qantas had the deeper pockets, and almost certainly would have won if the price cutting war had continued. The victory may well have been pyrrhic though, with Qantas suffering deep financial wounds, but retaining its percentage of available passengers.

2PAXfly Takeout

2021 is very different – all the competitors have been affected by the reduction in flying caused by the pandemic.

The Qantas Group and Virgin Australia have suffered the most, particularly at the hands of international and domestic state border restrictions.

REX in its regional mode has arguably been least affected and has received proportionally the biggest purse of government financial assistance. That position, along with its new Asian financing may change the game for this newest domestic competitor.

Time and possibly ACCC monitoring will tell if Alan Joyce’s predictions are correct.

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