Virgin is cutting capacity as the election keeps people at home

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Virgin Australia is cutting its seat capacity by 5.1% in response to weak demand as the nation heads to a federal election.

Qantas last month cut its capacity growth forecasts after seat demand began to ease over Easter.

Virgin today reported an underlying loss before tax of $18.6 million for the third quarter of the 2016 financial year, representing a 16.2% improvement. The statutory loss after tax was $58.8 million, a decline of $30.5 million.

CEO John Borghetti says the operating environment has been impacted by weak consumer demand and sentiment, uncertainty around the federal election and the resources sector downturn. An election could be held as early as July 3.

The airline will reduce capacity by 5.1% in the fourth quarter, with domestic reductions focused on regional routes.

A short time ago, Virgin shares were up 1.4% to $0.35.

Several short-term factors also affected performance in the third quarter, including a one-off increase of revenue from the Cricket World Cup.

Virgin says it expects to report an underlying profit before tax in the range of $30 million to $60 million for the 2016 financial year.

This would be an improvement of between $79 million to $109 million over 2015.

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