A former Qantas chief economist says the airline's response to its competition with Virgin is pulling it into the red, after the airline announced it faces a massive half-year loss and will slash 1,000 jobs.Qantas's share price dived 11 per cent to finish $1.07 on Thursday after it shocked shareholders by forecasting a loss of up to $300 million for the current half-year.Mr Joyce put the blame for the loss squarely on his main domestic competitor, Virgin, and its foreign-government-owned backers."Our competitor has just received $350 million, meaning that they can continue their uncommercial behaviour," he said.The fight for market share means both airlines are adding domestic seat capacity to an already over-supplied market."We saw 8 per cent growth in the domestic market in the last financial year. I think the underlying market growth is probably flat, but given the fact that we've got an oversupply of capacity, that's made things worse."But a former Qantas chief economist, Dr Tony Webber, says what is really hurting the airline is the way it is reacting to the challenge from Virgin."Certainly Virgin's capacity expansion has done a lot more damage than expected.