UPDATE 1-Virgin Blue to raise $190 mln, sees FY09 loss

* Virgin Blue set to more than double its share base

* Branson's Virgin Group to pour in up to A$80 mln

* Virgin Blue expects to break even in FY10

* CEO to quit in 2010 (Adds company comment, detail)

SYDNEY, July 27 (Reuters) - Virgin Blue Holdings Ltd VBA.AX, Australia's second-largest airline, is looking to raise A$231.4 million ($190 million) with a share sale at a hefty 31 percent discount after warning on Monday it was likely to post a loss for fiscal 2009.

The airline said the money would help bolster its capital position after it suffered the worst operating environment in its 10-year history over the last 12 months.

It had invested heavily on its expansion this year into flying to the United States at a time when travellers have cut back spending and its fuel prices remained high due to bad hedges.

"The proceeds of this raising will significantly strengthen Virgin Blue's capital position and improve liquidity and financial flexibility which we believe is prudent in the light of challenging conditions facing the airline industry," Chief Executive Brett Godfrey said in a statement.

It also said it would not pay a final dividend this year to help conserve cash.

The airline is set to post a loss of A$160-165 million for the year to June 2009, down from a net profit of A$98 million a year ago, and said it expected to break even in fiscal 2010.

Godfrey, who has led the company from its launch, said he would step down in 2010.

The capital raising includes a share placement to institutions to raise A$21 million and a 1-for-1 non-renounceable entitlement offer to rase about A$210.4 million, both priced at 20 cents a share compared with Virgin Blue's last trade at 29 cents.

The offer is fully underwritten by JP Morgan (JPM.N) and Credit Suisse (CSGN.VX).

Richard Branson's Virgin Group has agreed to invest up to A$80 million, taking up its full entitlement of 25.5 percent plus 35 percent of the share placement and sub-underwriting 20 percent of the retail component of the entitlement offer.

If retail investors do not take up their portion of the offer, Virgin Group's stake in Virgin Blue would increase to 30.2 percent. ($1=A$1.22) (Reporting by Sonali Paul; Editing by James Thornhill)