A LOOMING price war between Virgin Australia and Qantas could flood the market with air fares discounted to levels "not seen since before Ansett stopped flying".

After finally returning to profitability, Virgin Australia said yesterday it wants to put more planes in the sky, boosting domestic capacity by 9 per cent in the next six months.

It is a direct response to Qantas boss Alan Joyce's decision last week to boost domestic flights by as much as 11 per cent in the next four years.

In announcing a pre-tax profit of $82.5 million, Virgin said the deluge of extra seats would force down fares across the country.

Chief executive John Borghetti said his airline would be particularly aggressive in the corporate sector, where a jump in business class customers helped return the airline to profitability. "I have been around a long time - 40 years - and I haven't seen discounting to this level since way before Ansett stopped flying," he said. "There is a lot of aggressive competition but frankly we were expecting it and we will be as competitive as we can be to ensure we hold our position. We do have a cost advantage on our side."

Mr Borghetti said attracting corporate and government flyers had been key to its profitability, and the segment now made up 20 per cent of its domestic revenue.

"Importantly, reaching the 20 per cent target is a tipping point which we believe effectively creates a new competitive norm," he said.

Commsec market analyst Juliana Roadley said the full year result was a very strong set of numbers, but the lack of a clear outlook statement had hurt the share price yesterday.

Virgin also will soon begin a three-year business efficiency project aimed at delivering about $400 million in productivity gains.

"This project will be structured to ensure we have a sustainable cost advantage in the future," Mr Borghetti said.