Airfare wars: Battle for the skies

Qantas and Virgin slug it out

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The dogfight between Qantas and Virgin (with Tiger nipping at their heels) means cheaper flights for consumers, but might be bad news for shareholders.

Despite a 5.8% increase in the number of seats available, and a cut in airfares, Qantas flew 40,000 less domestic passengers than it did in July last year.

Qantas Airways Limited (ASX: QAN) has reported a 2.6% fall in the number of domestic passengers compared to the previous year. The international division fared even worse, with 8.5% less passengers flying overseas in July. Jetstar continues to do well, increasing its international passengers by 17%, while Jetstar Asia posted a 21% rise in passenger numbers. Qantas is looking to get out of flying to Europe as much as possible, due to the enormous costs it faces flying there. The company has been in discussion with Emirates over an alliance to fly to Europe, to cut Qantas' fuel bills and allow its international division to focus on flying more profitable routes into Asia and America.

On domestic routes, Virgin Australia Holdings (ASX: VAH) has introduced larger aircraft and more flights, as it ramps up its fight with Qantas to gain market share. Qantas' CEO Alan Joyce has vowed to protect the company's 65% market share at all costs. Virgin has also targeted the corporate traveller, introducing business class airfares, and marketing strongly to corporates.

The fare war hasn't hurt corporate travel agents, Flight Centre (ASX: FLT) and Corporate Travel Management (ASX: CTD), with both recently reporting growing revenues from the sector. But it is having an impact on Tiger Airways. CEO Andrew David has told the Australian Financial Review that the increase in flights by Tiger's bigger rivals would push back the likely timeframe for Tiger to break even in Australia.

The Foolish bottom line

Increased capacity is good news for passengers, with cheap fares likely to be on offer as Qantas and Virgin slug it out. That's no comfort for investors in either company, as the cheaper fares are likely to result in lower revenues, with neither company likely to score the winning punch.

If you're in the market for some high yielding ASX shares, look no further than our "Secure Your Future with 3 Rock-Solid Dividend Stocks" report. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

More reading

Motley Fool writer/analyst Mike King owns shares in Flight Centre. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »