Virgin Australia said on Thursday it would scrap flights between Sydney and Hong Kong, just 18 months after launching the route, blaming reduced demand caused by anti-government protests and the coronavirus outbreak.

The airline began flying from Australia's biggest city to Hong Kong in mid-2018, calling its China expansion a "key pillar" of its international strategy at the time, but now admits the route proved "challenging".

Virgin Australia Group chief commercial officer John MacLeod said demand had declined following months of sometimes violent protests in Hong Kong that have been followed by the coronavirus outbreak in China, which has spread to the city.

"While the decision to withdraw from the Hong Kong market has been a difficult one, it demonstrates our strong focus on driving greater financial discipline through our network," he said in a statement.

Virgin Australia launched the Hong Kong-Sydney route in mid-2018 but admitted it has found it 'challenging'
Virgin Australia launched the Hong Kong-Sydney route in mid-2018 but admitted it has found it 'challenging' AFP / PETER PARKS

"Current circumstances demonstrate that Hong Kong is no longer a commercially viable route for Virgin Australia to continue operating, however international tourism remains an important part of our strategy through our other international routes and partner airlines."

The route will cease operating on March 2.

Australian transport department data shows Virgin's outbound Sydney-Hong Kong flights were operating at just 64 percent capacity in November, compared with 80 percent for Qantas and Cathay Pacific.

The announcement comes as the airlines faces wider financial troubles, posting an underlying before-tax loss of Aus$71.2 million ($48.1 million) last year after achieving an underlying profit of Aus$64.4 million the previous financial year.

Virgin also announced in November it would suspend services between Melbourne and Hong Kong from February 11.