Virgin Blue hit by soaring fuel costs

Australian airline, Virgin Blue, is the latest airline to announce a fall in annual profit as its earnings are hit by soaring aviation fuel costs.

The airline, which Australia’s second largest, reported a 54.7% fall in annual profit. In the 12 months to June 30, the firm made AUS$97.7 million (£45.6 million) compared with AUS$215.8 million in the previous 12 months.

The airline, which is 25% owned by Sir Richard Branson, said it will face its most challenging operating environment in the new year, but still expects positive results from its two key business units - Pacific Blue and Virgin Blue.

At the market close today in Australia, shares in the airline fell 27.9%.

Chief executive, Brett Godfrey, said Virgin Blue’s fuel bill would increase by AUS$250 million in 2008/09.

Back in July, the airline’s biggest shareholder, Toll Holdings, sold the majority of its stake in the carrier to reduce exposure to the struggling industry. This has fuelled speculation that the airline could become a takeover target.

Australia’s largest carrier, Qantas Airways, announced in July that it was slashing 1,500 jobs as it too battles with rocketing fuel costs.

The International Air Transport Association (IATA) recently warned that the airline industry faced a grim outlook and passenger numbers would be affected by surging fuel costs and the deteriorating economic situation.

25 airlines have gone out of business this year including ATA Airlines, Aloha Airgroup, EOS, Maxjet, Silverjet and Skybus Airlines.

Last week, British Airways announced a partnership with American Airlines and Spanish carrier, Iberia.

The joint agreement will allow the carriers to share revenues and costs on transatlantic flights as well as fixing fares.

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