Airline discounting heavily
Qantas has cut air fares to an unsustainable level in order to drive demand, ceo Alan Joyce said.
The cash strapped Australian airline is facing stiff competition on important routes from rivals such as Singapore Airlines (SIA) and British Airways.
"Now, like other airlines, Qantas is discounting heavily to stimulate travel, especially on our international routes," Mr Joyce said in a statement.
"But these low prices that keep customers buzzing through airport terminals are not sustainable over the long term."
In March, SIA slashed its business class fares by 50% on core long haul routes including London-Sydney, Singapore and New Zealand.
The move by SIA started a price war between the full-service carriers, keen to maintain volume as travellers look for the cheapest deals.
Mr Joyce called on airports to lower their charges and allow airlines such as Qantas to keep expenditure down.
He said: "We need airports to become partners with us in reducing overall costs, and we have limited leverage given that most have a monopoly advantage.
"Of course, we appreciate that many airports, particularly privatised airports, have big capital burdens that require servicing.
"We understand this because big capital investments over long lead times are a constant and challenging reality for airlines.
"We are certainly having constructive discussions with various airport partners."
Mr Joyce said airports such as Frankfurt-Hahn, Malaysia, Singapore and Hong Kong had reduced charges in an effort to support airlines.
But airports closer to home, such as Sydney, Melbourne and Brisbane are yet to follow suit.
The premium segment has been worst hit by the economic downturn with passengers choosing cheaper options than business and first class.
Last week Qantas announced it is to withdraw first class on routes between Sydney, San Francisco and Buenos Aires and its Melbourne-Hong Kong-London service due to falling demand.
In April Qantas predicted a second half loss of A$188m (€106m), its worst result in six years, prompting it to freeze capital expenditure.
Qantas may resort to ‘ancillary' charges in a bid to maintain passenger revenue. On Monday the airline announced plans to charge an extra fee for exit-row seats.