UPDATE 2-Australia's Qantas reports dip in domestic demand, shares slide

Rushil Dutta and Ambar Warrick

* Shares see biggest single-day loss in over 14 months

* Budget carrier Jetstar biggest drag on domestic arm (Rewrites throughout; adds analyst comment, share performance)

Oct 24 (Reuters) - Australia's Qantas Airways Ltd on Thursday reported lower revenue from its domestic routes, particularly at its budget carrier Jetstar, sending its shares tumbling almost 6% to a near four-week low.

While revenue for its total business, which includes domestic and international operations, edged up 1.8% to a first-quarter record, revenue in its domestic unit fell nearly 1%.

"I think what's really concerned investors is that fall in domestic revenue, largely driven by a drop-away in Jetstar. This morning's drop also shows clear evidence that rising fuel costs have had an impact on overall profitability," said Michael McCarthy, chief market strategist at CMC Markets.

"Those two factors combined, along with the fact that Qantas was recently trading at an all-time high, appear to have hit the stock hard this morning."

Margins at Qantas and rivals such as Virgin Australia Holdings Ltd have been squeezed by higher fuel costs and weakness in consumer spending, as well as falling business confidence as economic growth in Australia falters.

This has forced carriers to cut costs and manage capacity to focus on more profitable routes.

Qantas' total capacity fell 0.2% during the quarter, with its international business clocking a 0.6% decline, while domestic booking saw a 0.5% increase.

"Qantas International has seen significant upside from competitor capacity contracting more than anticipated, which is expected to continue for at least the remainder of the first half," the company said.

"Domestically, published competitor capacity is set to increase despite the weakness in the market. The Qantas Group will maintain its strategic position in all parts of the market and therefore our total domestic capacity is expected to grow by up to 1% in the second half."

Qantas also flagged impact from unrest in the region, saying its interim profit could take a slight hit from anti-government protests in Hong Kong, while weaker freight demand would hurt its annual profit.

The carrier said its total fuel bill for fiscal 2020 could be as much as A$4.05 billion, compared with A$3.85 billion a year earlier.

The company's shares were 5.8% lower at A$6.140 by 0028 GMT, their lowest level since Sept. 25. ($1 = 1.4592 Australian dollars) (Reporting by Ambar Warrick and Nikhil Kurian Nainan in Bengaluru; Editing by Shailesh Kuber and Christopher Cushing)