Virgin Australia has reported an improvement in passenger numbers on its domestic flights in September.

However, the 3.2 per cent lift in passengers carried in the month, compared with the prior corresponding period, was not enough to absorb the nine per cent growth in capacity.

As a result, Virgin’s domestic load factor – a measure of how full its planes are – fell three percentage points to 79.2 per cent.

Virgin said in its monthly operating figures published on Monday that yields – an industry term for average airfares per passenger – so far in 2012/13 were “in line” with the prior corresponding period.

The lift in capacity in September was in keeping with company guidance, as Virgin replaced smaller Boeing 737 aircraft with larger Airbus A330s on flights from Sydney and Melbourne to Perth.

Qantas and its low-cost unit Jetstar have also pledged to add between nine and 11 per cent more seats over the second half of calendar 2012 in a bid to maintain a 65 per cent share of the domestic market.

Tiger Airways Australia was also continuing to pour additional seats into the market as it bounced back from its 2011 grounding due to safety concerns amid softness in consumer confidence.

JP Morgan analysts Scott Carroll and Megan Freeman said Qantas and Virgin were equally impacted by the excess capacity over Australia’s domestic skies.

So far in 2012/13, Qantas’s load factor had fallen about 3.4 percentage points, while Virgin’s was down about 3.8 percentage points, the JP Morgan analysts said.

“Domestic load and yield weakness remains the key risk to further earnings upside, at least near term,” the pair said in a research note.

“Improved profitability will rely on rational domestic capacity growth so demand can catch up to an existing over-supply.

“However, carrier commentary indicates this may not emerge for some time.”

At 1543 AEDT, Virgin was down a quarter of a cent at 48.25 cents.