...Qantas would continue to provide an efficient niche service in New Zealand, aimed at attracting international passengers and maintaining brand awareness.

Qantas has less than 20 per cent of the domestic market.

"There is a reality of making sure that you find your optimal size to achieve your overall strategy," Mr Mercer said.

"I would be surprised if you saw any major attack on the domestic market."

Mr Harbison said political pressure could also be brought to bear to constrain Qantas from competing too aggressively with taxpayer-owned Air New Zealand.

Air NZ could retaliate by resuming a direct service between Sydney and Los Angeles....