Qantas Airways Ltd, Australia’s biggest carrier, posted a narrower-than-expected annual loss as a domestic price war with Virgin Australia Holdings Ltd. eased.

Losses before tax and one-time items were A$646 million ($603 million) in the year ended June 30, the Sydney-based carrier said in a statement today. That compares with the average loss of A$763 million from eight analyst estimates compiled by Bloomberg News.

Qantas Chief Executive Officer Alan Joyce is cutting A$2 billion in costs and 5,000 jobs after a market share battle drove the nation’s two largest carriers to slash airfares and add seats. That challenge is easing, with domestic airlines boosting capacity at the slowest pace since 2012 in the year to June while corporate fares hit a 31-month high, according to government data.

Qantas are “focusing on the right things around both costs and capacity,” Sam Dobson, an analyst at Macquarie Group Ltd. in Sydney, said before the result. “Capacity across the market is where it should be.”

Qantas has lost both its investment-grade credit ratings over the past year, and a record first-half loss prompted the Irish-born CEO to take a paycut, sell or delay delivery of 50 planes, and lobby the government to remove foreign-ownership restrictions.

Qantas shares closed at A$1.295 in Sydney yesterday, marking an 18 percent rise so far this year that’s outstripped the 5.6 percent improvement in the S&P/ASX 200 index.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net. To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net. 

Photo Credit: A Qantas 767 taking off from Perth, Australia. planegeezer / Flickr