Virgin Blue destined for flotation

Sir Richard Branson intends to float his Australian budget airline and challenge Qantas and British Airways' grip on flights from Britain to Australia, as part of a strong push into the Pacific.

Sir Richard told an Australian TV programme that next year he wants to float a stake in Virgin Blue, in which he owns a half-share, and extend the airline's range to include destinations such as Fiji. The float could value Virgin Blue at £500m.

He also has plans for Virgin Atlantic - co-owned with Singapore Airlines - to start flying to Australia via an Asian destination such as Hong Kong.

The airlines would "most likely" announce an order for 30 to 40 new jets in the next four to five weeks, Sir Richard said. "Virgin Atlantic, I hope, will be flying all the way to Australia next year. We will finally be able to connect up Virgin Blue with Virgin Atlantic."

Sir Richard said he would challenge Qantas and BA's joint services agreement, which comes up for renewal in July next year, for access to Australia-UK routes.

He said that Virgin had agreement from the British and Australian governments for the new route, and hoped that the Hong Kong authorities would be "flexible".

"We are talking about big investments in big route expansions and making sure we can fill in the gaps in Australia and overseas that we are not already flying to," Sir Richard said. "There are still plenty of routes where the public is overpaying."

He declared that Virgin Blue was among the "most profitable airlines in the world," and that he expected it to make a net profit of $A100m (£36m) this year. "I've set our staff the challenge of seeing whether we can get over $A100m in this year's trading, and I'm absolutely confident that they will achieve that."

Investment bank Goldman Sachs is said to have been appointed to prepare for the flotation of a minority stake in Virgin Blue, which started flying in 2000.

Australian transport company Patrick Corporation bought a half share in the airline this year that valued it at more than £200m.

Virgin Blue has grown rapidly as a low-cost carrier, especially since the collapse of Air New Zealand's ill-fated purchase of Australian domestic carrier Ansett. The announcement comes as Virgin Blue ended months of legal wrangling with the operators of Sydney airport, allowing it to take over the terminal occupied by the defunct Ansett.

Last week Sir Richard - dressed in native American feathered headdress - smoked a peace pipe with Sydney airport chief Tony Stuart, before burying a hatchet under a concrete slab to symbolise the end of fighting over the terminal.

The budget airline had been threatening to hold back on a $A3.6bn investment to add to it 28-plane fleet until the dispute was ended.