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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 38.3 per cent to Virgins 32.1 per cent. Qantas low-cost airline Jetstar picked up some ground, however, to 22.2 per cent from 19.8 per cent in 2019.

Mr Seow said the dip in Qantas market share appears to be largely corporate/premium demand particularly in Melbourne, Sydney and Brisbane, where it was forecasting a rebound in capacity by December.

On face value this presents an interesting question: does the corporate recovery continue as implied by forward schedules? Or is there downside risk to capacity in the fourth quarter with potentially softer business conditions? Mr Seow speculated.

Regardless of the outlook, he said Qantas was offsetting capital city share losses by operating above pre-COVID-19 capacity in and out of key mining towns like Rockhampton, Olympic Dam, Mount Isa, Port Hedland and Kalgoorlie.

We estimate these routes have longer stage lengths/higher ASKs per trip, and interestingly this demand appears to be propping up the headline ASK recovery, Mr Seow said, referring to available seat kilometres.

And after airlines reiterated that demand for travel has held firm during the winter school holidays, Mr Seow said flights to leisure hot spots like the Gold Coast, Sunshine Coast, Ballina, Hamilton Island and Port Macquarie are filling the gap in lower capital city flying.

When we look at website traffic to assess the recovery in domestic demand (data as of June 30) we see no signs of softening, Mr Seow said.

We find this particularly interesting given the soft macro, but also in general leisure customers are more likely to book online/direct and generally book further in advance versus corporate.

Citi warned that the downturn may not yet have hit flights but said it was hard to know why, speculating that the lack of availability of international long haul fares might be creating a domestic substitution effect.

Separately, the Australian Bureau of Statistics put out travel data showing that inbound travellers or overseas tourists again outpaced the number of Aussies flying overseas in May. The number of outbound Australians fell compared with April, the data showed.

See more here:

Virgin pips Qantas on major cities, mining towns keep demand strong - The Australian Financial Review