QANTAS and Virgin Australia are caught in a peculiar dilemma of their own making: they could end their deathmatch and make aviation a profitable business but neither is prepared to make the first move.
And while Australians fret that the Flying Kangaroo might now be the Dying Kangaroo, the depth of our loyalty will be tested because any return to health for the national carrier will almost certainly come with higher airfares.
Qantas exposed the dire depths to which its business has sunk on Thursday with an "unacceptable and unsustainable" $235 million half year net loss, and a recovery plan including 5,000 job cuts as it finds $2 billion in savings.
Virgin followed suit on Friday with an $83.7 million net loss, and the sombre observation from chief executive John Borghetti that "the Australian domestic aviation industry has made a first half loss for the first time in 20 years".
Unsurprisingly, Mr Borghetti said Virgin had its strategy right and blamed Qantas' relentless determination to hold on to 65 per cent of the domestic market for the situation.
"I can't control, and nor do I want to control the capacity that other people want to put in but ultimately that is the biggest single inhibitor in this market for profitability," he said.
Qantas CEO Alan Joyce is just as certain Virgin is at fault - bankrolled by its foreign shareholders as it chips away at Qantas' only profitable business - the domestic market.
"The Virgin Australia group has increased capacity into the domestic market at more than twice the rate of the Qantas Group since July 2011," Mr Joyce said.
That has shrunk the domestic profit pool from more than $700 million in 2011/12 to less than $100 million in the first half of 2013/14, he said.
Mr Borghetti hit back with figures showing that for every domestic seat Virgin Australia added last year, Qantas added more than three.
And the figures are astounding: in one year Virgin added about 900,000 seats, while Qantas added three million.
Deutsche Bank research analyst Cameron McDonald said Australia's aviation industry has simply added too much capacity to be sustainable.
Qantas may cut 5,000 workers and save $2 billion but if business carries on as usual, it may not make a difference.
"Cutting costs is only one part of what we think to be the solution - you also have to get supply and demand back into balance," Mr McDonald said.
As Qantas has increased capacity, the amount it makes from each passenger-mile travelled, and the average number of passengers on each flight, have declined slightly.
"You can accelerate that cost base improvement but if things don't change on yield and load, that $2 billion in savings can be eroded very quickly," Mr Cameron said.
One unavoidable reality of a stable domestic airline industry is likely to be higher prices for airfares.
Mr McDonald pointed to the US market, where operators have reduced capacity and a subsequent rise in prices has followed.
Australia differs from the US in that it is a duopoly market, but Mr McDonald also points out that the nation has duopolies in many markets - and behaviour in those markets is far more rational.
Deutsche Bank estimates the potential profit pool in the Australian domestic market is as much as $1 billion - ten times what Mr Joyce says it is at present.
"People will pay more if you get supply and demand in balance - it's almost like who blinks first," Mr McDonald said.
The difficulty remains the damaging battle for market supremacy between the two players.
"It's almost like a bit of a prisoners' dilemma in that you can cut capacity and cede capacity to your competitor but what happens if Virgin then says they want 70 per cent of the market?" Mr McDonald said.
For now, however, there's no real prospect of change.
Mr Joyce is committed to maintaining Qantas' 65 per cent share of the domestic market, even as Virgin aims to continue its strategy of grabbing more of the premium domestic space, while Jetstar and Tiger Airways slug it out for the budget customers.
And Mr Borghetti is sticking to his line as well, saying his strategy is right and other things are simply beyond his control.
"The biggest thing out of our control is a competitor who just keeps doubling everything you do," Mr Borghetti said.
"It all hinges on what the biggest player does."
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