Investors sold off Qantas stock earlier this week after the carrier said it was cutting back capacity on domestic routes because of falling demand.
Qantas shares have been riding high following the airline’s return to profitability – but they dropped more than 10% on Monday.
The airline had been planning to lift capacity a little in April, May and June, but its plans have been affected by circumstances beyond its control.
Australia’s approaching double-dissolution federal election, to be held 2 July 2016, is creating uncertainty, particularly as current polls indicate the result could be close.
Markets hate uncertainty, and until the election is held, uncertainty will prevail.
Qantas noted “some softness in demand”, it said in a statement, related to the upcoming federal election and recent drop in consumer confidence in Australia.
The signs began to emerge over the peak Easter and school holiday period in late March and continued to be seen in forward bookings in April and May.
Qantas now expects domestic capacity to grow between 0.5% and 1% in the six months to 30 June 2016, compared to its previous guidance of 2%.
Internationally, Qantas has lopped three Sydney-Los Angeles flights from its weekly schedule. It will redeploy the aircraft on Singapore and Hong Kong routes.
Written by Peter Needham