Australia Airlines: Capacity observations: What‘s the direction on travel

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Australia Airlines: Capacity observations: What‘s the direction on travel

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17 Jul 2026 13:21:18 ET │ 26 pages

Australia Airlines

Capacity observations: What’s the direction on travel

CITI'S TAKE

Samuel Seow, CFA AC

The on/off-again Middle East conflict presents material volatility for the +61-02-8225-4321

industry. Heading into results we look at airline schedules and passenger samuel.seow@citi.com

data to glean information about the direction of travel, potential trends and

impacts on companies. Overall, we expect the current environment to be Aashita Bharadwaj

challenging to QAN, VGN and FLT alike. However, we favour airlines as our aashita.bharadwaj@citi.com

preferred exposure in the space.

Further domestic capacity moderation expected — Unsurprisingly elevated fuel

will likely be a headwind. As a result, we would expect further moderation in capacity

focused on leisure/non-capital city routes. In this regard we note industry 1Q27

capacity growth appears to have started below consensus expectations for the half.

Implying potential ASK revisions at the upcoming result to assist with unit

economics.

US travel watch — Overall we are picking up some softness in US long-haul

demand. Interestingly this largely started before the conflict, so we estimate recent

events and higher ticket prices may exacerbate this trend. Additionally, we note

demand generally peaks towards the end of the year for the US, implying current

uncertainty may be relevant for this booking window.

Short-haul resilient for now — Despite the uncertainty, we’re noticing relative

resilience in short haul travel. Pax data suggests Bali and NZ travel may be at all-time

highs and with rising long-haul prices/reducing disposable income this trend may

continue further.