Qantas Airways (ASX:QAN) shares rose 3% and Virgin Australia (ASX:VGN) shares inched up nearly 1% in morning trade Wednesday, following the release of the Australian Competition and Consumer Commission's domestic airline competition report on Tuesday.

Domestic passenger numbers have returned to pre-pandemic levels, but the growth in domestic airline seats has not kept up with demand, according to the report.

The number of seats flown by the major airlines in June this year was 2.8% lower, compared with the same period in 2019.

Since 2019, Qantas and Virgin Australia have increased capacity, but it was not enough to fill the gap left by Tigerair's exit from the market, the ACCC said.

Regional Express (ASX:REX) has reduced capacity on regional services over this period.