Qantas says it is on track to fully offset higher fuel prices with revenue improvements in its current financial year, and the Australian flag carrier has a generally positive demand outlook.

The group’s revenue increased 2.3% to A$4.4 billion ($3.1 billion) for the three months through March 31, its fiscal third quarter.

Qantas supplies a trading update rather than full earnings details for its third quarter, as it reports half-yearly.

Qantas said its unit revenue rose by 4% for the quarter. Its healthy revenue growth was achieved despite the shift of the Easter holiday period into the following quarter this year.

Group domestic capacity was down 1% and group international capacity fell by 1.9%, which “assisted with yield management and recovery of fuel costs,” Qantas said.

The group’s international operations, including its Jetstar subsidiary, saw a 6.2% increase in unit revenue. Capacity cuts by competitors on long-haul routes increased market share for the Qantas parent airline in particular. Group domestic unit revenue was up by 1.1%

For the group’s international operations, “the outlook is positive and continues to improve,” CEO Alan Joyce said. Market capacity in the June quarter “is contracting in response to higher fuel prices.” Qantas’ network and fleet changes are also driving revenue growth, he said.

However, Joyce described the demand picture as “mixed” for the domestic operation. Leisure demand is strong, but the group is “seeing increased softness in parts of the domestic corporate market for May and June.”

Joyce noted the carrier will have a “better sense of how temporary this is” after Australia’s upcoming federal election, “which always has a dampening impact on travel demand.”

Qantas expects to achieve a record level of revenue for the full fiscal year through June 30.

Adrian Schofield,