Rival clips Virgin Blue's wings

Virgin Blue is looking across Asia for expansion

Australian budget airline Virgin Blue has reported a slump in profits - hit by competition from rival Jetstar.

The carrier, which is a quarter-owned by Richard Branson's Virgin Group, said its four-month net profits fell by 22%.

Virgin Blue has been keeping its fares low to match those offered by Jetstar, the no-frills airline launched by Qantas in May.

Virgin Blue, which began operations in 2000, said conditions remained tough for the global aviation industry.

Looking abroad

The company said higher fuel prices and a flood of new planes on key routes had also affected its performance.

However, analysts expect Virgin Blue to report full-year net profits of around A$214m ($150.3m; £82.5m), up from A$158.5m the previous year.

Virgin Blue said its earnings would improve as growth in new capacity eased.

Chief executive Brett Godfrey said: "We would expect the next few months to be better than the first few months. We're happy where we are."

He added that Virgin Blue was looking to make acquisitions in the region, particularly in India and north Asia.

The company said revenue was up 29% in the first four months of its current financial year.

Virgin Blue has snapped up around 30% of the Australian domestic market since its launch.