Virgin Australia has narrowed its first half loss, even as fewer people booked flights and amid increasing pressure on its international business.
Virgin booked a first half loss of $53 million, an improvement of more than $20 million.
Despite fewer people flying, Australia's second largest carrier has been able to grow its domestic yield - the price paid per seat - by three per cent after snaring a greater share of the corporate, government and charter markets.
The domestic business posted underlying earnings of $104 million, up from $26 million, as the international arm's losses widened to $49.5 million from $31.9 million.
Chief executive John Borghetti said that while the past year had been "one of the most difficult years in the history of Australian aviation", the overall result was a significant improvement.
And while consumer sentiment remained weak and domestic passenger volumes fell 0.7 per cent, he said the first half had been marked by some positive signs.
"We continue to make in-roads into corporate/government travel which obviously is high-yielding so it changes the mix," Mr Borghetti told AAP.
The airline will continue to chase the corporate market, which Virgin says is on track to deliver more than $200 million in revenue over the next two years.
"But the pleasing thing here is that this isn't an improvement on business performance driven by costs or by yield. It is an improvement on business performance driven by both."
He said revenue growth in the leisure and international segments, however, remained constrained.
"So, whilst good momentum is building in our domestic business, which accounts for around 75 per cent of our total business, the international business to areas such as South East Asia, the UK and Europe has seen a more challenging environment, constraining yield recovery," Mr Borghetti said.
Analyst Neil Hansford, from Strategic Aviation Solutions, says he expects the yield growth will continue.
"It's probably got another 12 months of growth," he said.
"The other thing that will happen is they'll start to get better leisure results ... as people travel more within the country because they haven't got a strong Australian dollar."
Virgin made an underlying profit of $10.2 million, compared to a loss of $45.4 million in the corresponding period last year, boosted by the completed acquisition of low-cost carrier Tiger Airways.
Tiger made an underlying quarterly profit of $500,000, its first since December 2010.
Mr Hansford said the Virgin result signalled that Qantas was likely to announce an improved performance next week.
"I think when the Qantas result comes out, the Irish eyes will be smiling," Mr Hansford said, in a nod to Irish-born chief executive Alan Joyce.
"If Virgin's had this result, you can expect the same or better out of Qantas."
VIRGIN AUSTRALIA BOOKS ANOTHER FIRST-HALF LOSS
* Net loss of $53m, down from $74.3m loss
* Domestic EBIT of $104m, up from $26m
* International loss of $49.5m, up from $31.9m
* Revenue of $2.4b, up 6.0pct from $2.2b
* No dividend, unchanged
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