Virgin Group has taken a A$650 million (£300 million) paper loss in just over a year on its investment in the Australian budget carrier that it set up in 2000.

Shares in Virgin Blue, Australia's second-biggest airline, plummeted 22 per cent to a record low yesterday after it said after the market closed on Friday that its profit would more than halve because of higher fuel costs and increased competition.

In a double blow, Virgin Blue admitted that, after a year-long search, a buyer had not been found for at least part of the 63 per cent stake held by Toll Holdings, Australia's biggest freight company and its biggest shareholder.

Virgin Group is thought to be unlikely to increase its 25 per cent holding.

The domestic carrier, which commands 32 per cent of the Australian market, said that its net profit would drop to about A$100 million from A$216 million a year earlier.

It could also incur an extra A$120 million in fuel costs next year and faced an increase in capacity as new carriers entered the market.

In February, the company reported an 8.8 per cent drop in first-half net profit to A$113.3 million.

Analysts said yesterday that Virgin Blue's net profit guidance for the full year implied a second-half loss of at least A$4.9 million.

The airline's shares, which fell to 87 cents, listed at A$2.25 in December 2003 and reached a high in February last year of $A2.80.

Virgin Blue appointed Goldman Sachs JBWere in February to review its future amid reports that it might sell a controlling stake to another airline.

On Friday, it said that buyer interest had not reflected the airline's underlying value.

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