Virgin Blue profit forecasts cut

SYDNEY - ABN AMRO has slashed its fiscal 2005 profit forecast on Australian airline Virgin Blue Holdings Ltd. by 31 per cent to reflect lower second-half demand and higher fuel prices, and cut its share price target.

ABN lowered its target on the stock to AA$1.26 ($1.41) from AA$1.34.

"Our 'sell' recommendation is retained, as we believe VBA will underperform the broader market in the short-to-medium term given soft consumer discretionary spending combined with sustained high jet fuel prices," ABN AMRO analysts Anthony Srom and Amy McKenzie said in a report.

Citigroup Smith Barney cut its fiscal 2005 and 2006 profit forecasts by 12.6 per cent and 20.7 per cent, respectively, and lowered its 12-month share price target to AA$1.38 from AA$1.43.

"We believe VBA's share price could remain under pressure as fuel costs continue to increase, yields remain under pressure and the company undergoes a strategic review post Patrick Corp taking control," Smith Barney analyst Jason Smith, who kept his "sell" rating on the budget airline, said in a report.

Patrick owns about 62 per cent of Virgin Blue. Richard Branson's Virgin Group owns 25.6 per cent.

Shares in Virgin Blue were down 0.6 per cent at AA$1.67 by 10:27 a.m. (0027 GMT) on Friday in a flat broader market.

- REUTERS