Virgin Blue grabbed the title of third most profitable airline in the world this morning by claiming a before tax margin of 14.2 % on sales.

This makes it number three behind GOL of Brazil and Ryanair, and about twice as profitable per dollar of revenue as Qantas.

And it punched a hole in the old bogies about not getting access to government or corporate accounts.

The headline figures are net profits up 92.9 % to $216 million, caused by sales outstripping cost increases by 13 % to 2.6%.

Virgin Blue CEO Brett Godfrey shrugged off the ‘myth’ about Jetstar being the competitor.

“Our main competitor is Qantas”, he said.

It took a 5% slice of Federal Government travel versus a previous 0.4% and has trebled its take of top corporate travel accounts from 3% to 10% in two years.

So what does that mean for the budget battlers?

“We sold more cheap fares than ever last year,” Godfrey said.

“And we lost money flying over 10% of our network.”

These are sobering metrics for Qantas even after its record year.

Virgin Blue now has 139 days of average operating costs locked up in a war chest of $704 million to use against competitors or gain market share and says it is still thinking about starting its own pack-them-in ultra low cost operation to ‘take it’ to Tiger and Jetstar.

However Godfrey said in the short term it had decided to put the new jets it was going to use for the ‘ultra’ low fare project on launching domestic services in New Zealand instead, with an announcement being made in Wellington this Thursday.

“No-one is bullet proof in this industry,” Godfrey said. “But we are about as protected as we can be.”

He forecast that Tiger would keep a supply of unsustainably low fares in the market for at least 18 months, and that Virgin Blue would do even better by replacing what it might lose to the new competitor with higher fare paying customers won from Qantas as more government and corporate travel accounts came up for renewal.

Peter Fray

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