Market Update: We break down the business implications, market impact, and expert insights related to Market Update: What is it, what does it mean for prices, regular economy? – Full Analysis.
This was published 2 months ago
Qantas will cut back on domestic flight capacity, as corporate demand proves weaker than previously expected, three years after COVID lockdowns ended.
In a market update, Qantas flagged domestic growth of 5 per cent in the second half of 2025, from an estimate of 6 per cent, tipped in August.
“Australians’ love of travel continued to drive strong leisure demand, with the resources sector and small and medium business travel also growing,” CEO Vanessa Hudson said in a speech at the company’s annual general meeting in Brisbane.
“Corporate travel continued to grow, although less than previously forecast. We are adjusting domestic capacity in the second half to match the demand profile we are seeing.”
Despite the reduction of demand for domestic flights, shareholders generally praised Qantas’ performance under Hudson.
Airlines have struggled to adjust to changes in flying behaviour after COVID lockdowns, mixed with a reliance on remote meeting platforms like Teams and Zoom, altered the behaviour of employees from large corporations.
To sweeten the deal for business flyers, Qantas on Friday announced the roll-out of Economy Plus seating, which will cater to corporate flyers who had increasingly flocked to Virgin’s Economy X product.
Economy Plus class will give customers up to 40 per cent more legroom, priority boarding and access to overhead baggage space.
The product, deemed “significant” by one industry participant, will help refocus Qantas on the domestic business travel segment, which is facing stiff competition from Virgin Australia and a lacklustre recovery from the COVID era.
Economy Plus will be like premium economy but on domestic short-haul flights. It will be available in the new Airbus A321XLR and the A220s across the airlines’ network in Australia, New Zealand and the Pacific Islands. It will also be added into Boeing 737s cabin refits, announced in February.
An Economy Plus main cabin seat will have a seat pitch –a measure of legroom – of 34 inches (86.3 centimetres) on all planes, up from the current 30 inches in Economy class.
Complex Travel Group founder Mark Trim suggested the new offering would be felt throughout the domestic market.
“This is the most significant news for domestic travel for some time,” he said. “It’s an absolute game-changer for high-tier frequent fliers”, because it will create a new incentive for Qantas customers to try to achieve platinum membership.
It also suggests Qantas rival Virgin has been successful in wooing business travellers with its Economy X premium seating, whose features match Qantas’ Economy Plus, including 40 per cent more legroom, preferred overhead space and priority boarding, he said.
Trim said Virgin’s Economy X was loosely termed a “poor man’s business class”, in part because people could pay a $60 to $100 difference for a seat roughly equivalent to business class.
More broadly, Virgin, which has roared back into the market as an ASX-listed competitor, has embarked on a strategy of upselling customers on various extras and options – including bringing pets on board – as a way to increase revenue.
Qantas’ long-haul fliers now had an incentive to pay more for international trips, so they can reap the benefit of automatic Economy Plus seating in the domestic market, Trim said.
Many corporate travel policies prohibit business class travel domestically. That has encouraged corporate travellers to look to services such as Virgin’s Economy X.
Qantas’ lower-tiered Frequent Flier customers will be able to purchase the seating.
Signage on overhead bins will indicate what space is reserved for the Economy Plus passengers. The A321XLRs will feature 36 Economy Plus seats; the smaller A220s will have 20; and the 737s will have 48.
High-tiered members “will receive complimentary access to Qantas Economy Plus, enhancing the benefits available to them”, the airline said.
Pricing will be announced closer to the February 2026 launch.
Brandon Loo of the loyalty point advice site PointHacks said Economy Plus would ramp up demand for Qantas platinum tier membership.
“Qantas Platinum frequent flyers are currently unable to select any extra legroom seats for free on Qantas flights, so the introduction of free selection of Economy Plus seats will be a major improvement, particularly for those who fly domestic and short-haul international routes regularly,” he said.
The Qantas announcement aligns with airlines seeking to upgrade their offerings in pursuit of higher profits.
Swinburne Department of Aviation associate lecturer Salim Hijazeen said: “The updates show Qantas are keen on the product, given that it’s rolling out to the 737s too, not just the A321 and A220s.
“It just makes me think how many years will the 737s remain in the fleet. Especially with some 737s [being] approximately 24 years old.”
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