Virgin Australia expects the profit outlook for the Sydney-Melbourne-Brisbane triangle will be challenging for a long time as Regional Express Holdings Ltd (Rex) enters the market, Virgin's chief executive said on Wednesday.
Rex plans to launch Sydney-Melbourne flights in March in a challenge to Qantas Airways Ltd and Virgin and has begun selling seats for as little as A$79 ($58.70) each way to gain customers by undercutting its rivals.
The so-called "golden triangle" of the Sydney-Melbourne, Sydney-Brisbane and Brisbane-Melbourne routes normally accounts for 40% of domestic aviation traffic.
"It is a challenging outlook for the profit pool on the triangle for a long period of time because Virgin Australia has no intent of backing off that market share either," Virgin Chief Executive Jayne Hrdlicka told a CAPA Centre for Aviation event.
"I think they (Rex) should expect it is going to be super-competitive since we are all rebuilding the market."
As states re-open borders closed due to the pandemic, Virgin and Qantas are ramping up capacity on key routes. Virgin expects to reach 60% of its pre-coronavirus domestic capacity in January, while Qantas will reach 68% by the end of December.
Hrdlicka said the outlook for international flights was less promising, due to border closures. Virgin is maintaining relationships with key partners such as Singapore Airlines Ltd , Etihad Airways and Delta Air Lines Inc , but has no plans to resume widebody flying for at least 18 to 24 months, she said.
(Reporting by Jamie Freed; Editing by Tom Hogue and Clarence Fernandez)
