Qantas chief Alan Joyce expects average airfares will begin to rise now that the long-running domestic capacity battle against Virgin Australia seems to have ended.He said underlying demand growth in the local market was 4-5 per cent a year, but in the past few years capacity had grown by about 8 per cent.
''What that has meant is roughly for every percentage over the demand that meant a 1 percentage yield fall,'' he said in reference to returns on fares. ''And that is why our yields have been down by about 4 per cent.''
Qantas has said it will freeze domestic capacity in the first quarter of the 2015 financial year at a time when consumer confidence is low and demand in the resources sector slows.
Mr Joyce said the airline would still be offering attractive discount fares but the more rational capacity market meant fewer of those would be available once the airline was comfortably filling its seats.
Overall, domestic airfares have fallen by 21.6 per cent over the past decade and are at extremely low levels.
''It is very clear that the capacity situation in the domestic market has hit everybody's profitability,'' Mr Joyce said at the International Air Transport Association annual meeting in Doha, Qatar.
