Richard Branson prepares to take on Qantas

The low-cost carrier was launched three years ago and has almost a third of the Australian market.

Virgin Blue hopes its share sale set for 8 December will raise as much as A$558m ($397m; £237m) to fund its challenge of market leader Qantas.

Mr. Branson started Virgin Blue with a A$10m investment and his Virgin Group will remain the largest shareholder.

Australian transport company Patrick Corp owns 45 percent of Virgin Blue and said it will spend as much as A$137 million to maintain its stake.

After the flotation - which will see Virgin sell some of its own shares - outsiders will own about a quarter of the company.

Shares of Qantas, which also has launched its own low-cost carrier, dropped 1.2% in Sydney following the announcement.

The float had been expected to go ahead in June, but was shelved following the war with Iraq, an outbreak of the Sars respiratory virus and a downturn in Australian tourism sparked by the Bali bombings of October 2002.

Low-cost airlines such as Europe's Easyjet and Ryanair have grown rapidly in recent years as passengers shun extras such as in-flight meals and free drinks in favour of rock-bottom prices.

Europe's largest airline British Airways said profit in the three months to September dropped 57% to £105m from a year earlier. The company was forced to ditch 12,000 jobs, slim its fleet and axe loss-making short haul routes to cut costs.