Virgin Australia will axe flights to Bali and Phuket in an effort to turn around its loss-making international business and get back to profitability for the first time in four years.
The airline's international division made an underlying loss of $68.3 million in 2014/15, offsetting a turnaround in its domestic operations and dragging the group into the red again.
Virgin's underlying loss was $49 million, and its net loss of $94 million was an improvement on the $354 million loss in the previous year.
Chief executive John Borghetti is confident Virgin will return to profitability in the next 12 months, helped by the shake-up in the international business.
Analysts expect the airline to post an underlying profit of around $147 million in 2015/16.
The airline will offload routes from Melbourne, Adelaide and Perth to Bali to its low-cost subsidiary Tigerair Australia from March, and will dump its Perth to Phuket service in January.
Virgin will continue to fly to Bali from Brisbane, Sydney and Port Hedland.
The move will allow it compete harder for budget-conscious leisure travellers on the Bali route, while freeing it up to add flights where demand is greater on flights to New Zealand, Samoa, Fiji and the Solomon Islands.
It's the first time Virgin has used Tigerair internationally, and other short-haul routes are likely to be added in the future.
"I think it is fair to say this (flying to Bali) isn't a one-off Tiger solution, it's part of a more intricate plan," Chief executive John Borghetti told AAP.
Tigerair has repeatedly been named Australia's worst airline and suffered major brand damage when its fleet was grounded due to safety concerns in 2011.
Virgin has turned it around since buying the airline for $1 in October, with improvements in on-time performance and customer satisfaction, and Tigerair is on track to post its first profit in 2016.
Virgin's domestic business returned to the black in 2014/15, posting underlying earnings of $111 million thanks to lower fuel prices and an end to its so-called capacity war with Qantas.
After Mr Borghetti took the reins of the airline in 2010, it set its sights on its larger rival's dominance of the lucrative corporate traveller market, adding extra flights on key routes and beefing up its business class and loyalty programs.
That provoked a hostile response from Qantas, which pledged to add two flights for every one added by Virgin in order to preserve its market share, creating a brutal profit draining battle that dragged both companies to heavy losses.
Despite that, Mr Borghetti considers the strategy a success.
"The biggest thing people forget is that if you look at Australian domestic aviation, any airline that has challenged Qantas in the corporate domestic sector has gone broke," he said.
"We are the only carrier that's competed against them and come out the side in a stronger position."
Virgin Australia shares were steady at 44 cents.
ANOTHER LOSS FOR VIRGIN AUSTRALIA
* Net loss narrowed from $353.8m to $93.8m
* Revenue up 10pct to $4.75b
* No dividend paid, unchanged
