Virgin pips Qantas on major cities, mining towns keep demand strong

afr.com:

Robust travel demand in and out of mining towns is offsetting weaker domestic demand from business passengers in major cities on the east coast where Virgin has overtaken Qantas.

Citigroup’s Samuel Seow says domestic demand measured by number of seats and website traffic showed a return to pre-COVID-19 capacity.

Leisure travellers continue to take to the skies, but corporate travel softened. 

“After multiple false starts, we estimate current flight schedules indicate capacity is currently at pre-pandemic levels domestically,” Mr Seow said.

But business travel between major cities Melbourne and Sydney remains below pre-pandemic levels, with energy and mining demand offsetting the weakness and “current and lead indicators of leisure travel continue to hold up”.

“Although we estimate [domestic travel] volumes may be resilient, we don’t expect them to grow materially, meaning there may be downside to forecast capacity growth in particular on capital city routes,” Mr Seow said in a note.

And he said the mix of passengers reveals around 10 per cent less people visiting east coast capital cities, with monthly passenger numbers declining 1.5 per cent in Sydney and 3.8 per cent in Melbourne in May, compared with April. They were higher, however, in a year-on-year comparison with May 2022.

Airline Regional Express, known as Rex, which has started flying golden triangle routes between Melbourne, Sydney and Brisbane, issued a profit downgrade last month saying corporate travel demand softened dramatically in May and June as travel budgets were exhausted.

The data also showed that Virgin Australia has overtaken Qantas in major cities, growing to 37.7 per cent market share versus 35.3 per cent for Qantas. In December 2019, Qantas held