* Virgin 1Q loss A$3.6 mln versus A$8.5 mln profit
* Virgin fills more seats despite fall in revenue
* Rival Qantas experiencing similar market conditions (Recasts, adds analyst comments, share price)
By Jamie Freed
SYDNEY, Nov 2 (Reuters) - Virgin Australia VAH.AX said on Wednesday it would "actively manage" capacity after swinging to a loss in the first quarter of the financial year because of subdued trading conditions, particularly in Australia's domestic aviation market.
The surprise loss came as Australia's second-biggest airline and its larger rival, Qantas Airways QAN.AX have been hit by lower demand from mining companies since the end of a resources boom in remote regions.
Virgin reported an underlying loss before tax of A$3.6 million ($2.76 million) for the quarter ended Sept. 30, compared with an underlying profit before tax of A$8.5 million a year earlier. It said weak trading conditions had affected revenue, but did not elaborate or give revenue figures.
"That they made a loss was a surprise to us," Merrill Lynch analyst Matthew Spence said. "International had already been loss-making, so domestic is the surprise."
Virgin shares were down 4 percent in early trading, compared with a 0.8 percent fall on the broader market.
The airline said capacity was being "actively managed in response to the trading environment," but a spokeswoman declined to comment on whether it would cut flights if market conditions worsened.
Virgin's domestic capacity rose by 0.6 percent in the quarter but it still managed to fill a higher proportion of those seats, up 2.9 percentage points to 77.6 percent. It did not comment on yields or ticket prices.
Macquarie Equities analyst Sam Dobson said he assumed yields or fares had fallen, and that cost-cutting and rising passenger numbers had offset a revenue decline.
"They've seen the same type of pressure that Qantas was seeing," Dobson said.
"The resources downturn obviously impacts transcontinental east-west flights and intra-Western Australia (flights)."
On Monday, Qantas said it would trim domestic capacity by 1 percent in the first half after experiencing soft demand in the first quarter that led to a decline in revenue. said there had been a fall in demand for flying on mining, oil and gas industry routes, while corporate and government bookings had shrunk. The airline also pointed to tough conditions in the international market. ($1 = 1.3062 Australian dollars)