Branson's investment has paid off handsomely since launching Virgin Blue in September 2000.
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SYDNEY, Australia (CNN) -- No-frills carrier Virgin Blue has posted a 47 percent jump in net profit to Aust. $158.5 million ($111 million) in its first full-year result since listing last December.

The result is in line with market expectations, and above the A$150 million profit forecast by the airline when it went public five months ago.

But rising jet fuel prices and tighter competition is clouding investor sentiment torwards the discount carrier, pushing its share price Monday down 2.3 percent to a record low of A$2.07.

That is about 8 percent below its initial offer price of A$2.25 in December and 26 percent under the record high of A$2.62 it touched on February 25..

Virgin Blue, which was started in September 2000 by British entrepreneur Richard Branson but is now controlled by Australian transport and logistics group Patrick Corp, has built its Australian domestic market share to about 33 percent on the strength of discount fares.

It has been a huge financial success for Branson, who put in seed capital of just A$11 million. In March 2002 he sold a half stake in Virgin Blue to Patrick for about A$260 million and got another A$240 million from Patrick under a revised shareholders agreement last September.

The December float raised about A$600 million from the sale of new and existing shares, and Branson's Virgin Group still holds a 25 percent stake worth almost A$600 million. (Full story)

But Virgin Blue faces increased competition, with rival Qantas responding with its own slate of discount fares and the launch of its own low-cost domestic airline Jetstar, which starts flying next week. (Full story)

Qantas also said last month it would become a major investor in a new lost-cost airline based in Singapore. The airline, to be owned 49.9 percent by Qantas, will begin flying before the end of 2004, servicing cities within five hours' flying time of Singapore. (Full story)

All the airlines face the added pressure of rising prices for jet fuel. Both Qantas and Virgin Blue have already imposed a fuel surcharge to compensate for this.

Virgin Blue CEO Brett Godfrey said Monday that despite fuel costs rising more than 28 percent during the year, the airline's cost per available seat kilometer (ASK) fell slightly to 8.16 Australian cents for the full year, and was 7.73 cents for the half year to March 31.

"Our cost base is the lowest in the country and declining," Godfrey said.

He said the airline's focus for the future was on profitable growth, "not simply greater domestic market share".

Godfrey said Virgin Blue would expand international services under its Pacific Blue brand name, with flights to Fiji and Vanuatu starting in September. It already flies to New Zealand.

Rival Qantas said Monday it was entering two agreements worth A$1.4 billion with IBM and Australian telecommunications giant Telstra for its information technology needs over the next 10 years.

In February Qantas posted an interim net profit of A$357.8 million on the back of cost savings, strong domestic demand and a recovery in international travel. (Full story)

Shares in Virgin Blue are down 2.3 percent to A$2.07 Monday, about 8 percent below its initial share offer price of A$2.25 in December.

Qantas is off 0.3 percent to A$3.29. The broader market, measured by the S&P/ASX200, is down 0.17 percent.