Fuel bill hits Virgin Blue profit

Virgin Blue has a third of Australia's domestic aviation market

High jet fuel prices saw annual pre-tax profits at Virgin Blue, Australia's second-largest airline, fall by 55%.

The firm made 97.7m Australian dollars ($84.5m; £45.6m) in the year to the end of June, from A$215.8m in the previous 12 months.

Last month, its biggest shareholder, Toll Holdings, offloaded most of its stake in the carrier to reduce exposure to the ailing industry.

This stoked speculation that Virgin Blue could become a takeover candidate.

The airline, which is a quarter owned by Sir Richard Branson, said it expected the current financial year would be "a challenge", despite recent falls in the crude oil price.

It has launched a scheme to cut costs and increase income, including additional baggage charges and higher fares.

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

Airlines have been hit by record oil prices and several have collapsed.