Virgin Australia is on the cusp of returning to profitability after lower fuel prices and improved market conditions saw it rein in its full year loss.
The airline is yet to release its full year results, but figures included in its latest quarterly update show it made a net loss of $93.8 million in 2014/15, which is a $260 million improvement on last year's result.
On an underlying basis, the company lost $49 million, which is ahead of the $65 million loss analysts had expected.
The airline will release its full year results on August 7.
Morningstar analyst Ross MacMillan said the airline was now likely on track to post a profit next financial year, which would be its first in four years.
"Conditions look like they are improving and it certainly leads towards a situation where we'd probably anticipate Virgin would make a profit in the next financial year," he said.
Analysts expect the airline to post an underlying profit of around $147 million for 2015/16.
The narrowing in the airline's full year loss result has been driven in part by an almost halving in oil prices in the past 12 months, which brought down aviation fuel prices.
Meanwhile, both Virgin and Qantas have stepped back from a profit-draining battle for market share that saw them put on excess capacity through new flights.
Virgin has also been working to strip out $1 billion in costs over five years and grow its share of the corporate travel market, which has traditionally been dominated by Qantas.
"Basically the situation is that the airlines domestically are in a little bit of a sweet spot at the moment," Mr MacMillan said.
But Virgin's turnaround pales in comparison to that of Qantas, which is expected to make a near $1 billion underlying profit a year after posting a $646 million underlying loss.
And it comes amid a strong year for the global aviation industry that has seen strong performances from a number of international carriers, including Air New Zealand, Virgin's largest shareholder, which last month said it was on track for a pre-tax profit of more than $NZ520 million ($A474.32 million).
Virgin made an underlying loss of $36.9 million for the June quarter, which is traditionally weaker than other quarters, an improvement on the $46.2 million loss it made for the same period a year ago.
Meanwhile, the group's Tigerair Australia, which is expected to break even in the next 12 months, lost $9.8 million during the quarter.
Virgin Australia shares were flat at 44.5 cents as of 1400 AEST.
VIRGIN'S LOSS NARROWS
* Net loss of $93.8 million, from $356m loss in 2013/14
* Underlying loss of $49m, from $211.7m
* Passenger numbers down 1.6 per cent to 4.09m
Share
