Record jet fuel prices of more than $US170 have led Qantas and its budget partner Jetstar to cancel routes, ground old aircraft and raise fares.

Virgin Blue is to announce its austerity measures this week.

Virgin has attracted a tirade of bearish talk.

Fuelling the fire last week was a scathing report from JP Morgan analysts that suggested it would plunge into insolvency if it did not raise fares by at least 10 per cent.

Qantas boss Geoff Dixon and his Virgin Blue counterpart Brett Godfrey admitted their airlines were doing it tough but insisted Australian aviation would not lose a player.

In a wide-ranging interview with The Courier-Mail this week, Mr Dixon said lessons learnt from the 2001 collapse of Ansett Airlines had served the incumbent airlines well.

He claimed the local sector would withstand even higher fuel prices. "No Australian airline will even get close (to collapsing)," Mr Dixon said.

"I don't think there is any doubt that the Australian airline industry is one of the strongest.

"The fallout from the Ansett collapse created an industry that is strong on the fundamentals because there was excess capacity, costs were out of control back then and we have benefited from it."

His sentiments were backed by Virgin Blue boss Mr Godfrey.

Speaking in Sydney at the National Small Business Summit, he

admitted fuel costs had doubled in 12 months but said: "We won't be going out of business.

"Plenty of airlines are going and plenty will go as they fail to meet the changing needs ... but Virgin Blue will not be one of them.

"Qantas is looking at cutting routes and cutting staff ... our approach will be different."

Insiders expect Virgin to first reduce Gold Coast services.

SOURCE | The Courier Mail