Virgin Australia chief sees soft domestic market ahead

Virgin Australia chief, John Borghetti, has cautioned that the domestic travel market remained soft because households were still not willing to open their wallets.

Australia's second-largest airline would be in for some pretty stiff competition from Qantas and its budget offshoot, Jetstar, which announced yesterday it would up capacity on key east coast routes by up to 25,800 seats a week from July.

According to Borghetti, Virgin would take Qantas head on, but the ticket pricing would not change with the increase in capacity by its rival.

He said what was important to the company was yield and profitability. He added, frankly it did not deter the company from its strategy. He said market share could not be banked, what could be banked was profits.

The battle for travellers could hurt the earnings of Autralia's airlines this year as a large increase in flights on domestic routes would likely force them to discount fares.

Qantas will add an extra 11 return services a week on key business routes between Sydney and Melbourne, and Sydney and Brisbane, from 9 July and 23 August respectively. The airline has reduced flights to destinations in the Northern Territory to free up planes for the increased capacity on the east coast.