20 Aug 2008

Virgin Blue profit drops

8:28 am on 20 August 2008

Shares in the Australian discount airline Virgin Blue have fallen sharply after the company reported a 55% fall in net annual profit to $A97.7 million - down from A$215.8 million in the previous 12 months.

Virgin Blue also said it could not guarantee a profit this year.

The airline which owns the New Zealand domestic carrier Pacific Blue has suffered like most in the sector after fuel costs in the industry more than doubled in the year to June. Its shares fell by 28%.

Virgin Blue made a modest $A5 million in the second half of the year.

It has about a third of the Australian domestic aviation market. Its main rivals are Qantas Airways and Jetstar, Qantas's budget airline.

Virgin Blue expects Pacific Blue to break even by November - the first anniversary of its launch - saying its cost base is 25% lower than for similar aircraft it flies in Australia.

Pacific Blue has added new services across the Tasman and its sister brand, Polynesian Blue, has added flights as aircraft are moved off less-profitable routes in Australia.