The soaring cost of fuel may have relented marginally over the past month but it continues to leave the aviation industry reeling. The latest victim is Richard Branson’s low-cost Australian carrier, Virgin Blue, which has reported a 55% slump in profits.Profits dropped to AU$97.7m in the year to the end of June from AU$215.8m in the previous 12 months.

Virgin Blueat, which is Australia’s second largest airline, reported this as in line with forecasts and has been achieved in what has been generally acknowledged as a slowing economy and an unprecedented operating environment for airlines globally.

Last month, its biggest shareholder, Toll Holdings, divested most of its stake to reduce exposure to the troubled aviation industry, leading to speculation that Virgin Blue could become a takeover candidate.

The airline, which Richard Branson owns a 25% stake, said it expected the current financial year would be “a challenge”, despite recent falls in the crude oil price.

Virgin Blue Chief Executive Brett Godfrey said: “We have implemented a range of measures in recent months to mitigate the impact of increased fuel costs and we will continue to closely monitor the operating environment and take whatever actions are necessary to see our way through what is expected to be a challenging period.”

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

Measures include a raising ticket prices, a reduction in planned 2008/9 capacity growth, salary freezes and the introduction of baggage fees.
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