Virgin Blue is pinning its survival and expansion plan for the recession to much less cash than originally expected in the $231 million equity raising announced this morning.

This is good news for its largest shareholder, Richard Branson’s Virgin Group, which committed to lifting its stake from 25.5% to 30.2% under the 20 cents per share offer posted today where it was reported to have dug its heels in over an original $400 million capital raising proposal which would have forced it to dilute its stake.

And it seems to suit Brett Godfrey, Virgin Blue’s co-founder with Branson, who has been Virgin Blue’s only CEO since it took off in 2000, who has also committed to his full participation in the scheme pending his retirement from that role before the end of next year.

But will it work? Virgin Blue’s unaudited figures for the year to 30 June show a strong domestic performance compared to Qantas, yet its profitability has dropped from $95 million in financial year 2008 to an estimated $25-30 million in the year ended last month.

The start up and capital costs of the V Australia entry into the US market will drag the 2009 results down to a net loss after tax of $160-165 million compared to an overall profit of $98 million to 30 June 2008.

And Virgin Blue intends to pull another 5% of domestic capacity out of the market in this financial year and add no capacity in the following year.

This leaves the upside for Virgin Blue in the next two years as a sharply improved performance by V Australia, and possibly, to regulatory approval of a comprehensive trans Pacific operational alliance with Delta Airlines.

The indications for V Australia actually look encouraging, but this is the airline game, and everything can change for better or worse in an instant.

There aren’t many surprises in the performance or unaudited financials for fiscal 2009. The cost cutting and capacity reduction programs seem to be working and Brett Godfrey has hinted on a number of occasions that 10 years in the game in which Virgin Blue outsmarted and outlasted the established carriers and legions of doomsayers would probably be enough.