Virgin Australia appears to be holding up well in the face of increased competition and extra seats in the domestic market, the airline's latest traffic figures show.
Australia's second largest carrier said today it had increased passenger numbers and yields during the first two months of the 2012/13 financial year, compared with the prior corresponding period.
Yield is an industry term that measures average airfares per passenger.
"The domestic operating statistics of July and August reflect the strategic repositioning of Virgin Australia," the airline said.
Virgin said domestic traffic had increased 2.3 per cent so far in 2012/13, compared with the same time a year ago.
Meanwhile, there had been positive yield growth in July and August.
By contrast, Qantas' most recent operating statistics showed passenger numbers on its Qantas domestic and QantasLink flights fell 1.4 per cent in July, compared with the same month a year earlier.
Moreover, domestic yields on Qantas domestic, QantasLink and Jetstar domestic had fallen due to increased capacity in the domestic market.
In August, Qantas and Jetstar announced plans to increase domestic capacity by up to 11 per cent between July and December, while Tiger was continuing to add flights as it built up its operations since being suspended in 2011.
Virgin has flagged a nine per cent increase, the bulk of which would come on routes between Perth and Australia's east coast, where wide-bodied Airbus A330s were gradually replacing smaller Boeing 737s.
"Domestic overcapacity will show no signs of relenting," the Centre for Aviation said in a research note in late August.
On its international flights, Virgin increased passenger numbers by 4.9 per cent compared to the prior year.