Despite the speculation, Pacific Blue says it's here to stay

Virgin Blue's local offshoot, Pacific Blue, is moving swiftly to reassure the flying public and staff that there are no plans to retreat back across the Tasman.

The health of its Tasman and Pacific Island operations has been questioned by some in the Australian financial community, suggesting the takeover of the company by logistics giant Patrick Corp will mean a cutback in services.

Virgin Blue chief executive Brett Godfrey said yesterday that such suggestions were wrong.

"People peddling that sort of tripe are on drugs," he said. "Pacific Blue contributes positively to our bottom line. It operates in probably the world's bloodiest aviation market and has carved itself a nice little niche ... "

Godfrey said Pacific Blue's strategy had been approved more than two years ago. There had been no reason since then why it should not continue to grow.

"Not only will Pacific Blue be expanded this year but we expect it to do even better. It exceeded our expectations in terms of profitability and I am very, very happy in terms of the performance of that airline."

The recent surge in world oil prices has hit low-cost carriers like Virgin hard. The airline told the Australian Stock Exchange yesterday that its big fuel bill would cut after-tax profits by more than $95 million.

Last Friday, Patrick said it had won control of just over 50 per cent of the airline after launching a $1.18 billion hostile takeover offer. It already owned 45.4 per cent.

The Tasman has been described by airline executives as a bloodbath, with vigorous competition slashing yields to unsustainable levels.

A recent shake-out of the sector has seen Air New Zealand's budget arm, Freedom, stop flights from Auckland, Wellington and Christchurch to Brisbane.