SYDNEY - AUSTRALIAN airline Virgin Blue Holdings Ltd reported on Tuesday a nearly 55 per cent drop in annual net profit, hurt by record jet fuel costs.

The airline posted a net profit after tax of A$97.7 million (S$119.7 million) for the year ended June 30, down from A$215.8 million in the previous year.

Earnings per share fell 54.9 per cent from 20.6 Australian cents to 9.3 cents.

'Based on current market conditions and fuel prices, a positive result for the current financial year is expected, but remains a challenge,' the company said in a statement.

In June, Virgin Blue implemented a programme intended to help mitigate the rising cost of fuel. The group said it would cut costs by A$50 million in the 2009 financial year, increase ticket prices by an average of S$5 across 55 per cent of its routes in Australia and freeze management salaries.

Virgin Blue is Australia's second largest airline, after national carrier Qantas Airways Ltd. -- AP