Virgin Australia is on its way to profit

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Virgin is expected to be close to reaching after tax profit when its releases full financial year results Friday.

Analysts forecast underlying pretax profit, which the airline industry sees as a good measure of performance, to be around $151 million.

The return to the profitability for Australia’s second biggest airline comes on the back of an end to the price war with Qantas, bringing better returns for each seat sold, plus cost cutting and lower fuel prices.

Virgin is now competing more on service, positioning itself as a Qantas alternative with all its flights now coming with free luggage and food. This puts it in position for a better return per seat.

In a trading update last week, Virgin reported an underlying loss before tax of $36.9 million for the fourth quarter of the 2015 financial year, a $46.2 million improvement.

The key highlights in the quarterly result was a range of non-fuel cost cutting, success in attracting high yielding market segments and the improved performance of Tigerair.

Virgin says it expects to see this positive trajectory continue.

Looking at all four quarters, the statutory loss after tax for the full year was $93.8 million, an improvement of $261.8 million on the $355.6 million loss in the previous year.

Analysts expect Virgin to return to full profitability sometime in the current financial year.

The airline will also take a greater piece of the revenue pie. UBS sees Virgin’s (including Tiger) share of the domestic market earnings pool rising to 26% in the 2017 financial year from 8% in 2012 .

Qantas is forecast to post a $960 million underlying profit when it announces its results on August 20.

Virgin shares were trading at $0.435.

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