** Citi initiates coverage on airliner Virgin Australia VGN.AX with a "neutral" rating and price target of A$3.30

** VGN shares began trading on June 24, after the company raised A$685 million ($446.76 million) in IPO

** Market may not be able to support price and volume growth at or above average, Citi says

** Brokerage notes company's forward flights schedule being largely equal to historical cancellation rate

** Citi, however, favours Qantas Airways QAN.AX, upgrades airline to "buy"

** Highlights QAN's better options in the international and low-cost carrier market, its ability to generate higher relative return in this capacity

** Besides Citi, 2 analysts have "buy" rating on VGN and one "hold", while average rating of 14 analysts on QAN is "buy" - data compiled by LSEG

** QAN shares up 23.7% YTD; VGN down 3.1% since debut

(Reporting by Nichiket Sunil in Bengaluru)

((Nichiket.Sunil@thomsonreuters.com;))