SYDNEY: Australia’s budget airline Virgin Blue Holdings Ltd reported a drop in its net profits for the year ended September to A$105.2 million from A$157 million a year ago. The airline has been struggling against high fuel costs — a 76 per cent increase during the year, which a hedging plan and fuel surcharge on tickets could not help neutralise — and the result was largely in line with the guidance.

The company is fighting a A$4.6 billion takeover attempt by transportation company Toll Holdings Ltd. It is 62.4 per cent owned by port operator Patrick Corp Ltd. It the acquisition goes through, Toll is planning to offer part of Patrick’s stake to existing shareholders.

This will help the other key shareholder, British airline operator Richard Branson’s Virgin Group, increase its holding to 40.5 per cent from the current 25.1 per cent.

Virgin Blue said it hoped gain more revenue from the business travel market to grow earnings. It also announced a maiden A$0.25 a share final dividend, paying out A$262 million.

Chief executive Brett Godfrey said the airline had been in the process of consolidation. It had cut on costs and increased productivity, withdrawn from loss-making routes and invested in business traveller strategy. “We are now well positioned to take advantage of the size, scale, and frequency achieved in our 2003-2004 expansion,” he said.

The company said increase in the fuel price had pushed its cost per available seat kilometer to AD 0.0784 from AD 0.0747 a year earlier. Operating costs rose 22.2 per cent to AD1.60 billion.

Launched four years ago, Virgin Blue now has roughly one third of Australia’s domestic airline market. But, it faces competition from national carrier, Qantas, which also has its own budget airline, Jetstar.

It is believed that the dividend payment, more than double the company’s annual profit, affords company chairman Chris Corrigan’s Patrick Corp. some A$164 million in cash to fight the hostile takeover by Toll.