Virgin Blue announced that it has lowered its market guidance for financial year 2010 to around 25 per cent due to deteriorating domestic and international markets.

The airline company said that its net profit before tax and exceptional items for 2010 will be in the range of $20-40 million. Earlier this month, Virgin Blue announced it had been expecting a result of $80 million to $100 million range, citing weaker forward bookings and increased volatility.

"Since the guidance given earlier this month, we have continued to see rapid deterioration and increased volatility in the operating environment, particularly in respect of the leisure segment both domestically and internationally," said Virgin Blue in a statement to the ASX.

Virgin Blue said it is expecting average fares to decrease by over 10 per cent due to the recent Bureau of Infrastructure, Transport and Regional Economics (BITRE) data for discount economy fares.

The company expressed confidence that despite the sharp downturn, its short haul business will make a net profit before tax and exceptional items in the order of $100 million.

"The company will continue to monitor market conditions and, should these prevail, we have flexibility to adjust capacity through lease returns," Virgin said. "However, we remain focussed on defending our core strategic routes."

Yesterday, Virgin Blue reported a 0.5 per cent increase in its domestic passenger numbers and 18.7 per cent in its international passenger numbers for month of April.