Virgin Australia has blamed weak consumer spending, federal election uncertainty and the mining slowdown for its need to cut capacity on its flights.
The airline says it will reduce capacity, with a focus on regional routes, by 5.1 per cent during the fourth quarter.
Virgin reported a statutory loss of $58.8 million in the three months to March 31, and an underlying loss of $18.6 million in its third quarter update on Monday.
However, the carrier maintained its intent to return to a full-year profit in its 2016 financial year, forecasting underlying profit before tax of between $30 million and $60 million.
That would be $79 million to $109 million better than the previous year.
Virgin made a net loss of $94 million and an underlying loss of $49 million in FY15.
Chief executive John Borghetti said weak consumer sentiment, hit further by the prospect of an early federal election, was creating a challenging operating environment.
"This environment has been impacted by weak consumer demand and sentiment, uncertainty around the federal election and the resources sector downturn," Mr Borghetti said in a statement to the ASX.
"As a consequence, we will reduce group capacity by 5.1 per cent in the fourth quarter, with domestic reductions focused on regional routes."
Virgin's share price dropped after the announcement and at 1508 AEST the stock was 1.75 cents, or five per cent lower at 33.25 cents.
CMC Markets chief market strategist Michael McCarthy said shares in Virgin have slipped largely because of its plans to reduce capacity, .
"Any time an airline cuts capacity, the understanding is that they'll give up market share or revenue or both," he said.
"It is not a positive for Virgin and, of course, their pre-tax losses are continuing and that speaks to the highly competitive environment."
Mr Borghetti said fleet restructure charges and other initiatives would provide Virgin with significant cost savings.
Virgin's capacity figures for the March quarter shows its domestic capacity rose 1.6 per cent while its international capacity declined 2.2 per cent.
Meanwhile, its budget airline service Tigerair increased its capacity by 14.1 per cent.
Virgin posted a net profit of $45.7 million in the half-year to December, a significant turnaround from $53.1 million net loss 12 months earlier.
